Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BATH CORPORATION BILL

SUNDERLAND CORPORATION BILL

Lords Amendments considered and agreed to.

WEST SUSSEX COUNTY COUNCIL BILL

Read the Third time and passed.

WESTMINSTER ABBEY AND SAIN MARGARET WESTMINSTER BILL [Lords]

KILLINGHOLME GENERATING STATION (Ancillary Powers) Bill [Lords]

As amended, considered.

To be read the Third time

Oral Answers to Questions — SOCIAL SERVICES

Compensation Payment (Latent Cases)

Mr. Skinner: asked the Secretary of State for Social Services what plans he has to introduce legislation to cover latent cases excluded from any payment by way of Industrial Injuries or Workmen's Compensation Acts.

The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): None, Sir. Previous study by successive administrations disclosed major practical problems. A further study is however proceeding with the co-operation of the Trades Union Congress.

Mr. Skinner: I am pleased to hear that there is another study proceeding, and I am also pleased to know that the TUC has been invited to assist. I hope

that the NUM can help in this matter. Is the hon. Gentleman aware that it represents no more than about 50,000 people in all, many of whom are seriously injured and do not get a penny by way of compensation? I hope that the hon. Gentleman will not adopt the attitude that apparently has been adopted previously whereby it appears to the man in question that all that is happening is that the passage of time is disposing of the whole problem.

Mr. Dean: I assure the hon. Gentleman that there is no lack of good will here. It is a very complicated and difficult problem which successive Administrations have tackled. We are grateful for the co-operation of the TUC in the matter, and I hope that we shall find a satisfactory solution.

Several Hon. Members: rose——

Mr. Speaker: Order. I must point out that long supplementary questions mean that I have to rule out others.

Abortion

Mr. Leslie Huckfield: asked the Secretary of State for Social Services what recommendations he has made to regional hospital boards about facilities for out-patient abortions.

The Secretary of State for Social Services (Sir Keith Joseph): My Department has asked regional hospital boards to keep their gynaecological and abortion services under close review and develop them as necessary to the extent that resources permit. I intend to wait for the report of Mrs. Justice Lane's Committee before considering what further guidance is needed.

Mr. Huckfield: Does the right hon. Gentleman realise that in many areas, Birmingham especially, abortions of any type are extremely difficult to obtain because of the almost mediæval attitude of gynaecologists? Does not he accept that out-patient or lunch-time abortions can save a great deal of valuable money and bed space? Will not he give a clear direction to all hospital boards to increase the provision of out-patient abortion facilities?

Sir K. Joseph: No, Sir. While there are some hospitals which are undertaking abortions on an out-patient basis, and


assessing the results, the medical profession is not fully assured that the techniques are safe for general application.

Birth Control Centres

Dr. Stuttaford: asked the Secretary of State for Social Services how many local authorities have supplied him with figures which enable him to calculate the percentage increase in consultations in local birth control centres when an entirely free service has been provided; and what are these percentage increases.

The Under-Secretary of State for Health and Social Security (Mr. Michael Alison): I regret that this information is not yet available.

Dr. Stuttaford: Is my hon. Friend aware that in Camden, where a free service has been introduced this year, first attendances have gone up by 27 per cent., which shows the value of a truly free service as regards supplies as well as advice?

Mr. Alison: The Camden service, I understand, has not yet been working a full year, which is one reason why I cannot give a categorical answer. But if the experience of Kingston upon Hull, which has had a free service since 1966, is any indication, large increases in the use made of the facilities may be expected.

Attendance Allowance

Mr. Roy Hughes: asked the Secretary of State for Social Services how many complaints he has received concerning the turning down of applications for attendance allowance.

Sir K. Joseph: Up to 27th June, the latest date for which figures are available, over 23,000 people had written concerning the rejection of a claim to attendance allowance and review action had been initiated.

Mr. Hughes: Does not the right hon. Gentleman agree that under this scheme many hopes have been raised only to be dashed when claims have been rejected? There have been numerous tragic cases in my constituency which I have brought to the right hon. Gentleman's notice. He in turn has indicated that he intends to broaden the scope of the scheme over

the next two years. Will he, therefore, cut the time scale in order to help this needy section of the community?

Sir K. Joseph: The House will want to get this matter in proportion. Only a year ago no such households received any benefit at all. Now 78,000 households are receiving benefit, as opposed to the 50,000 which was all that the Government expected on the information available. We are carrying through extensions over the next 2¼ years but, as has been explained a number of times, I cannot undertake to shorten the time scale.

Mr. Boscawen: Does my right hon. Friend agree that the Attendance Allowance Board is doing a remarkable job in a new sphere? In due course we shall want to hear of its experience and what it is learning while doing this job. Secondly, does he agree that in any system with which we try to help those in the greatest need there will always be marginal cases which fall just outside that category who will feel resentment over it? That is the nature of the kind of system we are trying to work.

Sir K. Joseph: I am grateful to my hon. Friend for referring to the services of the Attendance Allowance Board, which is staffed by the most devoted people, and on an honorary basis. Of the 23,000 people who have complained and for whom a review has been initiated, over 9,000 have been awarded the allowance.

Mrs. Castle: While recognising that there is an administrative problem in extending the eligibility criteria for attendance allowances, which extension might mean that a number of these cases will be accepted, not rejected, may I ask whether the right hon. Gentleman is satisfied with a situation in which we shall have to wait until 1975–76 before all the extension allowances are paid? Is the Minister telling us that it is impossible to speed that up? Will he have another look at it?

Sir K. Joseph: I fear that, despite intense anxiety on the part of my hon. Friends and myself and of the civil servants concerned to speed this up, it would not be justifiable to promise an acceleration. However, we will continue to keep the possibilities under careful review

Brucellosis

Mr. Eadie: asked the Secretary of State for Social Services if he has made an estimate of the likely annual claims to his Department as a result of brucellosis being scheduled as an industrial disease.

Mr. Dean: No, Sir. There is no sound basis on which such an estimate could be made. The incidence of the disease was looked into by the Industrial Injuries Advisory Council to which my right hon. Friend the Secretary of State referred the question whether the disease should be prescribed. In its report the Council said that estimates of the number of persons affected by the disease vary widely, there being no comprehensive information about its prevalence.

Mr. Eadie: Is the hon. Gentleman aware that the decision to make brucellosis a scheduled industrial disease is very welcome? I am sure he will agree that the National Union of Agricultural Workers and the TUC must take great credit for the evidence they submitted to the Advisory Council. Will he assure the House that there will be proper diagnostic procedures for trying to diagnose the disease amongst people who think they are suffering from it?

Mr. Dean: I will gladly look into that matter. I am grateful to the hon. Gentleman for the tribute he paid to all those who have made this possible. The new arrangements will come into effect at the end of this month.

Nurses and Midwives (Retainer Payments)

Mr. Pavitt: asked the Secretary of State for Social Services if he will now establish a system of retainer payments for nurses and midwives comparable to the one by which he seeks to retain the services of women doctors after marriage.

Mr. Alison: I doubt whether the system as it stands would be appropriate to nurses and midwives. The Committee on Nursing under the Chairmanship of Professor Asa Briggs will no doubt be considering whether existing arrangements for attracting married nurses back into active practice need to be supplemented.

Mr. Pavitt: Will the hon. Gentleman probe this matter further? Our State Registered Nurses are superb and second to none in the whole world and we are losing a tremendous number. Of 60 who passed through a London teaching hospital recently, only one is still nursing. Will he therefore put pressure on the committee and seek to report to the House at an early date?

Mr. Alison: I do not think the Briggs Committee needs any pressure. It will certainly be reporting before very long. I should point out that the number of qualified women nurses and midwives employed on a part-time basis in hospitals in England and Wales is increasing steadily. At the end of September, 1971, they represented 42 per cent. of the total women qualified staff. The difficulty is getting them at the right places at the right times.

Prescription Charges (Children)

Mr. Ashton: asked the Secretary of State for Social Services what estimates he has made of the total cost of abolishing prescription charges to children aged 16 years when the school leaving age is raised to 16 years.

Mr. Alison: Information for such an estimate is not available.

Mr. Ashton: Why has the Minister made the decision that prescription charges shall not be free? Is it not an established practice in this country that people who are too old or not old enough to work shall have free prescriptions? When the school leaving age went up from 14 to 15, prescription charges exemption went up. Why should the exemption not now go up to 16 years?

Mr. Alison: We did not make the decision. The Labour Administration made the decision for the cut-off at this point. The cut-off is rational. It is related to health and medical needs, not to any other consideration.

Industrial Disputes (Supplementary Benefit)

Mr. Bruce-Gardyne: asked the Secretary of State for Social Services when he now expects to complete his review of the operation of the Social Security Act,

Sir K. Joseph: The provisions of Section 2 of the Social Security Act, 1971, for recovering post-dispute payments of supplementary benefit are working satisfactorily. I have no statement to make about the review, which is continuing, of payments during disputes.

Mr. Bruce-Gardyne: Why is this review taking so long? Now we know that the strike subsidy is running at £14 million a year, surely it is clear that the 1971 Act is in need of revision. Will my right hon. Friend assure the House that we are not dragging out feet in this matter to avoid scaring Mr. Vic Feather from signing some declaration of intent? If so, surely the game is not worth the candle.

Sir K. Joseph: My hon. Friend legitimately commands a considerable audience outside this House on this subject. I do not think he would wish to mislead that audience. Multiplying the first quarter's figures by four and the first half's figures by two is not necessarily an accurate prognostication of the cost to public funds. The Government are taking time over this important subject because the danger of making things worse, not better, on a whole range of aspects is one which the whole House would wish to avoid.

Mr. Ashley: Is the right hon. Gentlemen aware that the philosophy behind this campaign of starving the workers out belong to the last century? Will he advise his hon. Friend that this kind of campaign is seriously damaging industrial relations?

Sir K. Joseph: The whole House has great respect for the hon. Gentleman, but he is on a thoroughly bad point. It is a legitimate matter of public interest, which both Front Benches in turn have recognised, to get the right balance between support for families against hardship and the incentive to strike.

Mr. O'Malley: Would not the best way of reducing payments of supplementary benefit to the dependants of strikers be to seek to reduce the number of days lost through strikes, which are running at four

times the rate per year under this Government than under the Labour Government, by scrapping the Industrial Relations Act, which is poisoning industrial relations? Secondly, is it not time that the Secretary of State stood up to the Department of Employment and insisted that the recommendations of the Donovan Commission should be accepted by which people who are at present unjustly denied unemployment benefit by the operation of the grade and class provision were taken off supplementary benefit and given the unemployment benefit to which they are entitled?

Sir K. Joseph: The country will have noted that in several situations when it was being bullied by unjustified strikes the Opposition supported them.

Mr. Bruce-Gardyne: On a point of order. In view of my right hon. Friend's reply, I beg to give notice that I shall seek to raise the matter on the Adjournment.

Sedative Drugs

Mr. Dalyell: asked the Secretary of State for Social Services when he expects to reach a decision on the proposal of the British Medical Association that he should set up an inquiry into the use and abuse of barbiturates and other sedative drugs; and if he will make a statement.

Sir K. Joseph: The suggestion by the British Medical Association was that detailed research studies should be instituted into the epidemiology, use and abuse of barbiturates and other sedative drugs. It will take some time to determine, having regard to work already done or in progress, what further studies are required and how they could best be designed and carried out.

Mr. Dalyell: Is there not prima facie evidence that the abuse of barbiturates is on the way up?

Sir K. Joseph: I cannot give an immediate answer to that question. The Government have consulted the medical profession about the possibilities of further medical self-discipline on this issue. It is in response to its reply that further studies are needed that I have given my reply to the hon. Gentleman today.

Dr. Summerskill: Will the Secretary of State bear in mind that 20 million prescriptions a year for barbiturates are being given by doctors and that these can be and are becoming dependent drugs for both young and middle-aged people? Is he satisfied that advising doctors to prescribe carefully is sufficient to deal with this acknowledged problem?

Sir K. Joseph: No, I am not satisfied. Discussions are in progress with the medical profession and we are awaiting the results of studies into the pattern of prescribing which are in hand.

Benefits (Publicity)

Mr. Sydney Chapman: asked the Secretary of State for Social Services how much money his Department has spent in each of the last three years for which figures are available on publicity informing persons of their entitlement to social security benefits; and in what ways and proportions these figures were allocated.

Mr. Dean: The figure for 1971–72 was £399,400 of which 77 per cent. was spent on family income supplement, 12 per cent. on attendance allowance and 9 per cent. on pensions for the over-80's. I will, with permission, circulate figures for the two earlier years in the Official Report.

Mr. Chapman: I am grateful to my hon. Friend for that reply. Does he appreciate that there is a need for a continuing, sustained publicity campaign to warn people of their entitlement, the more so when one realises the many new benefits which have been brought into existence during the last two years?

Mr. Dean: I am grateful to my hon. Friend for drawing attention to that. We intend to continue the publicity arrangements, but perhaps I may remind the House that for the largest bulk of people, namely, retirement pensioners, in most cases the initiative for the claim is taken by the Department and does not have to be taken by the individual himself.

Following is the information:

Expenditure on publicising Social Security Benefits:






£


1970–71
…
…
…
142,400


1969–70
…
…
…
83,300

This was mainly allocated as follows: 1970–71:

Pensions for the very elderly—40 per cent.

Extension of Widows'Pensions—22 per cent.

1969–70: Increase in retirement pension—90 per cent.

Manchester Hospitals (Waiting Period)

Mr. James Lamond: asked the Secretary of State for Social Services what is the average waiting period in the Manchester Regional Hospital Board area for an operation after a patient has been placed on the priority waiting list.

Mr. Alison: Waiting times for admission vary according to the specialty and the circumstances of the individual case. An average figure for the region would, therefore, have little meaning, but of cases admitted to the two main hospitals in Oldham in the first quarter of this year, just under 60 per cent. had been waiting for less than two months. Urgent cases are, of course, admitted without delay.

Mr. Lamond: Is the hon. Gentleman aware that one of my constituents waited for admission for well over a year after being placed on the priority list? There is a widespread feeling that that situation is not untypical of the whole country and that it is caused by greedy doctors who are determined to supplement their incomes by using National Health Service facilities and to whom the Hippocratic oath seems to mean as little as the Prime Minister's election promises mean to him?

Mr. Alison: The first and factual part of the hon. Gentleman's supplementary question merits careful investigation and I should be grateful if he would send me a note about the priority case having had to wait for 12 months. It is not typical of Oldham. We recognise that waiting lists are too long, and we are taking steps to see whether we can reduce them.

Dental Services

Dr. Summerskill: asked the Secretary of State for Social Services when he expects the report of the Working Party on the Dental Services; and whether he will make a statement.

Sir K. Joseph: The working party has much ground to cover and I cannot yet forecast a date for a final report; but I have told the working party that I will


at any time consider any interim recommendations it may wish to make.

Dr. Summerskill: Would the right hon. Gentleman bear in mind that the dental service is in a state of decay, that an increasing number of dentists are opting out of National Health Service to take up part-time or full-time private practice, and that there is a shortage of manpower and woman power in the dental service? Has he read the two reports which show that the dental health of the nation is in decline and that 25 per cent. of the children who are now five years old will require dentures of one kind or another by the time they are 20?

Sir K. Joseph: It is by no means new that the dental health of this country gives grave cause for worry. I do not accept the hon. Lady's diagnosis, but I have been sufficiently worried to embark on a deep and searching examination, with the British Dental Association, into what our policy should be in the near future to improve dental treatment of the public.

Dr. Stuttaford: Is my right hon. Friend aware that the hon. Lady is right, and that the dental service is not only in decay but has crumbled, particularly in those cases which require difficult treatment, namely the old, the infirm, children, and the disabled, who create problems for the dentist? He sees them at a financial loss to himself.

Sir K. Joseph: It is true that there is a problem in that in some areas some dentists will not give the more complex treatment under the National Health Service. That is one of the main subjects on the agenda for discussion between the Government and the British Dental Association. But my hon. Friend is wrong to support the hon. Lady's general proposition, because all the statistics of treatment show that the dental service is improving, though not improving nearly fast enough.

Mr. Robert C. Brown: Does the right hon. Gentleman still hold to the view which he expressed in this House some months ago, namely, that increasing dental charges gives people an incentive to take care of their teeth?

Sir K. Joseph: Yes, Sir.

Nurses (Insurance Cover)

Mr. William Price: asked the Secretary of State for Social Service what steps are now being taken to provide insurance coverage to National Health Service nurses whilst on duty in ambulances.

Mr. Alison: Proposals for a new code of injury allowances for payment to or in respect of nurses and others employed in the National Health Service who are permanently incapacitated or who die as a result of accidents on duty are under consideration by the Joint Superannuation Consultative Committee.

Mr. Price: What is the hon. Gentleman going to do about the case of which I sent him full details involving my constituent, Mrs. Enid Wells, who is a staff nurse at St. Cross Hospital? She went on a mission to another hospital with a six-year-old boy, the ambulance overturned in a road accident and she was seriously injured. All that we have received from the hon. Gentleman's Department is a letter saying that there is no insurance coverage and that it is up to individual nurses to take out their own insurance. Is not this a most scandalous state of affairs, and one which the hon. Gentleman should look into immediately?

Mr. Alison: I think the hon. Gentleman knows, from the letter which I wrote to him on 5th July, that we admit that the present arrangements are not satisfactory. He will also know that there are possibilities and facilities for ex gratia payments in special cases. But I would rather not comment in detail on what measures may be applied to a particular individual.

Mrs. Castle: Has not a scandalous situation been revealed by the case which my hon. Friend has brought to the attention of the House? May we be told what is to be done, and when?

Mr. Alison: I think the right hon. Lady knows that in the Superannuation Act, 1972, we have taken power to remedy the situation, but the precise details of the provisions—which may well be retrospective in their application—are still a matter for consultation and it would not be proper to divulge what arrangements are to be made.

Mr. Molloy: Would not the hon. Gentleman agree that we are reaching a


dangerous situation in the employment of both State Registered Nurses and midwives? Often a State Registered Nurse goes on to become a midwife, and very often, in either capacity, she has to travel in busy areas. Indeed, she is sometimes subjected to risks of a kind for which many other industrial workers would be paid danger money. Does not the hon. Gentleman agree that there is a need for a comprehensive review of the entire situation?

Mr. Alison: I think the hon. Gentleman knows that when, in the case of injury or illness, it is expected that the patient will recover and resume duty, the normal sick pay arrangements apply. The problem arises in the case of death or permanent injury. We admit that there are gaps, and we hope that they will be more than adequately covered by the new proposals.

Chronically Sick and Disabled Persons Act, 1970

Mr. Alfred Morris: asked the Secretary of State for Social Services whether he can now state by what date he expects to make a statement on the replies he has received from local authorities on their implementation of Section 1 of the Chronically Sick and Disabled Persons Act, 1970.

Mr. Alison: As stated in my reply to hon. Members on 13th June, I expect to report to the House before the Summer Recess.—[Vol. 838, c. 1249–50.]

Mr. Morris: Is the hon. Gentleman aware that the impressive progress made by many local authorities in implementing Section 1 of the 1970 Act shows that an increase in Exchequer support is urgently necessary if local authorities are to save taxpayers' money? Will he make a statement at the earliest possible date and agree to give publicity to the best that local authorities are doing in implementing this Section of the Act?

Mr. Alison: I intend to give the House full information as soon as possible.

Finer Committee

Mr. Cronin: asked the Secretary of State for Social Services when he expects to receive the report of the Finer Committee; and what action he will take

in the meantime to improve the conditions of one-parent families.

Sir K. Joseph: I understand that the committee hopes to complete its report early in 1973. Special provision has already been made for one-parent families in the family income supplement scheme and is included in the proposed scheme of rent rebates and allowances under the Housing Finance Bill. Otherwise I cannot anticipate the committee's recommendations.

Mr. Cronin: Bearing in mind that these are usually the most desperately poor families, would the right hon. Gentleman consider doing more to help them pending the report of this committee, which is a long way ahead?

Sir K. Joseph: With the best will in the world, it is difficult to see exactly what we can do. The committee was set up because the then Government—and we understand their need—wanted to know what best could be done for this group of families. A recent report published by my Department comparing the situation of one-parent and two-parent families showed that at the relevant date one-parent households were not notably worse off than two-parent households.

Junior Hospital Doctors (Pay and Conditions)

Mr. Torney: asked the Secretary of State for Social Services if he will now take immediate action to improve the pay and conditions of junior hospital doctors.

Sir K. Joseph: My right hon. Friend the Prime Minister informed the House on 23rd June of the Government's readiness to accept the Doctors' and Dentists' Review Body's recent recommendations, which include average salary increases for junior hospital doctors of between 7½ per cent. and 14½ per cent. Aspects of their conditions of service are regularly discussed between the Health Departments and representatives of the professions, including representatives of junior doctors, and I would expect the improvement there has been over recent years to continue.

Mr. Torney: Is the right hon. Gentleman aware of the appalling conditions that exist for junior hospital doctors, particularly in Yorkshire? Doubtless the


right hon. Gentleman is aware of the document "More in Sorrow", which is a survey of the Sheffield Regional Board. He must be aware of the appallingly low pay and very long hours, and the terrible conditions under which some of these unfortunate young people have to work. The lives of many thousands of people are at stake in the hands of young hospital doctors. Is the right hon. Gentleman aware that their fight back is hindered by the fact that they are inhibited because they are fearful of victimisation if they fight their own case? What will the Minister do about it—and do quickly?

Sir K. Joseph: As for the extra duty allowances and the minimum time off, I am reviewing the working of arrangements in consultation with the professions and hospital authorities. But the report to which the hon. Gentleman refers goes out of its way to say that many of the grievances of junior doctors should best be dealt with by approaches by them to their hospital authorities.

Herts and Essex Hospital

Sir D. Walker-Smith: asked the Secretary of State for Social Services (1) what was the bed-occupancy rate for the maternity unit at the Herts and Essex Hospital for the last five quarters, taken respectively as a percentage of maternity beds occupied out of the total of 36, and the corresponding percentage of 30 beds, being the residual complement after omitting six beds reserved for emergency use and separated from the main unit;
(2) what consideration was given to bed-occupancy at the existing maternity unit at the Herts and Essex Hospital in his decision to transfer in-patient maternity facilities from Bishop's Stortford; and if he will make a statement.

Sir K. Joseph: Although six beds are on a different floor, they are available for use when required and are not reserved for emergency use. The relevant bed occupancy rates are therefore those for the 36 beds and I will with permission circulate them in the OFFICIAL REPORT. These rates constituted one of the many factors I considered, before reaching my decision.

Sir D. Walker-Smith: Is not the bed occupancy rate which was used and quoted at the time of the decision to close

this maternity unit the lowest occupancy rate of the quarters preceding it and following it? As to the other factors, will my right hon. Friend agree that there has been an increase in deliveries and that there is a very keen and substantial local demand for these facilities in Bishops Stortford?

Sir K. Joseph: Occupancy rates were only one of the factors which I had to take into account. My right hon. and learned Friend will be aware that there is now strong medical opinion that there is need for a concentration of special services for maternal care and delivery. Owing to my right hon. and learned Friend's persistent support of this local service, there will continue to be antenatal and post-natal facilities in Bishops Stortford.

Following is the information:


Herts and Essex Hospital


Percentage of Obstetric Beds occupied for quarters ended:


March, 1971
…
…
69


June, 1971
…
…
70


September, 1971
…
…
64


December, 1971
…
…
58


March, 1972
…
…
64

Invalidity Pension (Disregards)

Mr. Dempsey: asked the Secretary of State for Social Services if, with a view to alleviating hardship to disabled persons, he will give a general direction to the Supplementary Benefits Commission to disregard the first £2 of an invalidity pension; and if he will make a statement.

Mr. Dean: No, Sir. It would not be appropriate to apply a disregard to a benefit which is part of the basic provisions of the national insurance scheme.

Mr. Dempsey: But bearing in mind that disabled persons enjoy the £2 disregard, should not recipients of the invalidity pension who are chronically disabled be entitled to the same advantage? Would the Minister further consider that many of these recipients are incapacitated and off work for a much longer period than even some of the disabled? Ought that not to entitle them to the advantage of the £2 disregard?

Mr. Dean: I think that the hon. Gentleman is referring to the special arrangements which have existed for a long time


now in the war pension scheme and industrial injuries scheme. But the fact is that under the existing arrangements with the Supplementary Benefits Commission the special needs of the disabled can be and are taken into account.

Mr. O'Malley: Is there not already a disregard for quite a large number of national insurance benefits which the Minister implied by his first reply could not be disregarded? Will he take into account that extra expenditure is involved by invalidity pensioners and those who suffer a disability, not least due to the fact that many of them may lose their right to free prescriptions as the result of the receipt of the invalidity allowance and invalidity pension?

Mr. Dean: There is not a main disregard, as the hon. Gentleman well knows, within the national insurance scheme. There are special arrangements for industrial injuries and war pensions. But the Supplementary Benefits Commission has power, which it exercises where appropriate, to meet the special additional needs of the disabled. There is no doubt that the Commission will continue to exercise this power.

Great Western Road Hospital, Gloucester

Mrs. Sally Oppenheim: asked the Secretary of State for Social Services what steps he intends to take to remedy the health risk presented by the chimney of the Great Western Road Hospital in Gloucester.

Mr. Alison: I have no reason to believe that such a risk exists. However steps have been taken to reduce the emissions of black smoke which I believe to have given rise to local concern.

Mrs. Oppenheim: Is my hon. Friend aware that while emissions of black smoke of more than a permitted quantity have very recently been observed from these chimneys, it would appear to be almost impossible not only to prosecute a National Health Service hospital under the Clean Air Act but also to get his Department to consider itself as other than an accused proprietor, instead of as a body hearing complaints as an alternative to a criminal prosecution? Is my hon. Friend equally aware that many people find it incongruous that while

one Government Department is striving to abate pollution another Government Department appears to be condoning it?

Mr. Alison: My hon. Friend will be glad to hear that the local hospital authority and the Deputy Regional Engineer of the South-Western Regional Hospital Board are to meet the public health inspector this very day for further discussions.

Rehabilitation (Tunbridge Report)

Mr. Whitehead: asked the Secretary of State for Social Services if he is satisfied with the availability of physical medicine under the National Health Service; and if he will make a statement.

Mr. Norman Lamont: asked the Secretary of State for Social Services what improvements he intends to recommend towards the establishment of a comprehensive rehabilitation service for the physically and mentally handicapped arising out of the report by the subcommittee of the Standing Medical Advisory Committee under the chairmanship of Sir Ronald Tunbridge.

Sir K. Joseph: I welcome the interest in rehabilitation but the subject is complex as well as very important and has been relatively neglected for years. The recommendations in the recently published report by a sub-committee of the Standing Medical Advisory Committee range widely over the health and other relevant services. I am anxious to see what can be done now and in the long term to improve all aspects of existing provision, but the many issues referred to in the report will need careful study before policies can be clearly defined. I plan to visit a number of the hospitals with good rehabilitation facilities to inform myself at first hand of the best current practice.

Mr. Whitehead: I thank the Minister for that answer. In his study of this problem, would he bear in mind the very grave situation at the Derby Royal Infirmary, where we have an average waiting list of over three months before working people can have any access to physiotherapy or rehabilitation? Is the Minister further aware that the dedicated and overworked staff of that hospital have had their morale somewhat damaged by the knowledge that there is no plan for a


building which would give them better facilities over the next 10 years?

Sir K. Joseph: I fear that the experience of the inhabitants of Derby about rehabilitation is not unique. There is a grave area of national need for improvement. I am intensely aware of the importance of improvement over a whole range of services.

Mr. Lamont: Is my right hon. Friend aware that this is a matter of concern on both sides of the House? When physiotherapy treatment is needed, it is needed urgently. Will my right hon. Friend give higher priority to the training of more doctors and staff in this speciality?

Sir K. Joseph: Yes. It is not only physiotherapists and doctors—though they are very important—but a whole range of interacting services and skills which are needed. I ask my hon. Friend to be assured that the Government take the improvement of these rehabilitation services as an important priority.

Mr. Carter-Jones: Is the right hon. Gentleman aware that the Tunbridge Report said quite clearly that physical medicine need not be a speciality required for rehabilitation? What was said in Tunbridge was that any consultant with an interest in rehabilitation should be considered for appointment in leading a team of all disciplines to assist in rehabilitation.

Sir K. Joseph: I am sure that rehabilitation has implications for almost all medical disciplines and nursing and I am about to embark upon discussions with the professions on the implications of Tunbridge.

Salmon Report

Mr. Winterton: asked the Secretary of State for Social Services whether, in the light of opposition to its operation, he will now cease to implement the proposals of the Salmon Report.

Mr. Alison: No, Sir.

Mr. Winterton: If my hon. Friend had his ear a little closer to the ground he would appreciate that his reply shows a very complacent attitude and that the implementation of the Salmon recommendations is opposed not only by hospital management committees but by large numbers

of doctors, nurses and consultants, and I speak particularly of the nurses in Macclesfield. Does he not feel that far too hard a line is drawn between clinical and administrative grades in nursing in the report and does he not feel that it will result in far too many chiefs and not enough Indians?

Mr. Alison: A number of representations on the subject have been received but none from nursing organisations. We cannot accept that a gap is opened up between administrative and clinical practice. The two are more closely integrated under the Salmon proposals.

Blind Persons (Welfare Officers)

Mr. Orme: asked the Secretary of State for Social Services if, in view of the representations to him by blind people at Chichester, he will review the level of recommended provision of welfare officers responsible for blind people living at home and make recommendations to local authorities accordingly.

Mr. Alison: In consultation with the appropriate bodies we are currently reviewing the pattern of social services for the blind, including staffing. We will be giving guidance to local authorities when we have completed the review.

Mr. Orme: Is the Under-Secretary aware that there has been some unevenness in provision since the introduction of the new Act and that as a result many specialist workers have been denied the job they were trained to do? It is important that these workers should be allowed to take up the duties for the blind. Will the Minister see that special training is reintroduced and ensure that the Act is not abused by certain authorities in this regard?

Mr. Alison: We are conscious of and sensitive to the representations which the hon. Member brought out in his supplementary question. The problems have arisen as a result of reorganisation under the Local Authority Social Services Act. We are keeping the matter under close review.

Mr. Alfred Morris: In reply to my earlier Question the Minister gave me no answer on the point of increasing Exchequer support to local authorities so that they can improve their services to


the blind, the deaf and the dumb, as well as to others who are permanently and substantially handicapped. Will the Secretary of State attempt to persuade the Chancellor of the Exchequer on this deeply important matter?

Mr. Alison: The hon. Member knows that massive increases in Exchequer funds have been made available precisely to this sector, to the extent of 25 per cent. in real terms in the present and the preceding financial years.

War-disabled Pensioners

Mr. Brewis: asked the Secretary of State for Social Services whether it is his policy to maintain the war preference element for all war-disabled pensioners and to take full account of the effects of inflation on money values.

Mr. Dean: The Government are committed to an annual review of war pensions and allowances in the light of changes in the cost of living. The war pensions preferences are being maintained in the increased rates payable in October to war disablement pensioners and war widows.

Mr. Brewis: Is it not the case that only about 27 per cent. of the most disabled have their preferences kept in line with the cost of living? Is there not a case for introducing an all-embracing service allowance to cover the other 73 per cent. of war pensioners?

Mr. Dean: The preferences are being maintained but they are being concentrated on the most severely disabled and on the war widows, as is shown by the fact that all the main allowances for the severely disabled and war widows were increased last year or this year, and in many cases in both years.

Income Distribution

Mr. Meacher: asked the Secretary of State for Social Services what he estimates to be the change in real terms in income distribution produced by his social service measures since June, 1970.

Mr. Dean: I regret that reliable estimates are not available owing to the variety of factors involved.

Mr. Meacher: Is the Under-Secretary aware that, as a result of the Govern-

ment's fiscal and welfare measures so far the best estimates show that skilled workers on average are now 80p per week better off while those in business and the professions on incomes over £5,000 a year are perhaps some £36 a week better off? Is not this business man's order of priorities the reason why the Secretary of State could recently offer the Pre-school Playgroups Association only a pathetically inadequate £45,000 for the immense aim of helping to break the family cycle of deprivation?

Mr. Dean: The Government are much more interested in practical measures to help the elderly, the disabled and the widows than in abstract theory about equality and envy.

Welfare Benefits (Cohabitation)

Mr. Norman Lamont: asked the Secretary of State for Social Services whether he will now publish the rules governing the activities of investigators of his Department inquiring into abuse of welfare benefits by cohabiting women, in view of the fact that purported extracts from those rules were published in the Spectator of 17th June, 1972.

Sir K. Joseph: No, Sir. The extracts were incomplete, and I deplore their publication. I do not intend to make it any easier to avoid detection by more extensive publication.

Mr. Lamont: Since my right hon. Friend's Department invariably accepts the verdicts of its inspectors, and since those verdicts are often successfully appealed against, should not those whose lives are being investigated know the criteria upon which those verdicts are arrived at?

Sir K. Joseph: This is a difficult area. I have been worried by one or two cases of which there have been reports recently. While some people may be subject to unfair deprivation of help from the Supplementary Benefits Commission, there is no doubt that there is quite a measure of abuse in these matters. I have to try to reconcile the public and the personal interest and I have to make sure, with the Chairman of the Commission who is responsible in the first case, that the procedures are being carried out precisely.

POST-APOLLO PROJECT

Mr. Dalyell: asked the Prime Minister if he is satisfied with the co-ordination between the Department of Trade and Industry, the Foreign Office and the Ministry of Defence in making the preparations for the European Space Conference on 11th-12th July, which will decide whether or not to participate in the post-Apollo project with the Americans.

The Prime Minister (Mr. Edward Heath): Yes, Sir.

Mr. Dalyell: That is inconceivable. What is the Prime Minister's version of the events which led up to the postponement of the European Space Conference at the 59th minute of the 11th hour?

The Prime Minister: The fact that other countries did not want to hold it.

Mr. Ian Lloyd: Has the Prime Minister received the unanimous representations made by the British aerospace industry on the question and does he think they are consistent with the advice given to him on the subject by his civil servants?

The Prime Minister: Ministers do not discuss advice given to them by civil servants. The position is that the Americans expressed a preference for a European approach to the post-Apollo project, and it must be settled, therefore, by a European conference.

Mr. Benn: Will the Prime Minister publish a White Paper on the project, as large sums of money and a large number of skilled people are required? Before this country is committed by the Government to a space programme of this kind in these circumstances the public will want to be satisfied that this should be the priority for these scarce resources when there are many other schemes to which they might be applied.

The Prime Minister: The right hon. Gentleman is correct and I think that most European countries take that view. That is why they are examining the project with great care. They have had to ask for the information from the Americans. The first calculation is that for the United Kingdom it would involve a cost of about £20 million. That is a

very large sum. But as the American project has now changed its nature considerably since the first invitation was made——

Mr. Dalyell: We were too late.

The Prime Minister: The hon. Member must not say that it was because Europe was too late. The plain fact is that the American concept has completely changed, and President Nixon has made clear to his own Congress his reasons for this. Europe now must decide whether to take part in the new concept, which is one of almost entirely orthodox technology as far as Europe is concerned.

STATE SALARIES (BOYLE REPORT PROPOSALS)

Mr. Arthur Lewis: asked the Prime Minister whether he will request the Boyle Committee to re-investigate the salaries of the chairmen of the nationalised boards and the higher paid civil servants; and whether he will propose to this committee an increase in the salaries of these public servants, due to the expected rise in the cost of living resulting from the floating of the £ sterling.

The Prime Minister: No, Sir.

Mr. Lewis: I thank the Prime Minister for that expected reply. The next time that he appeals to trade unionists for wage restraint will he point out to them that as the average worker is receiving £31 a week, it is a little immoral for anyone, be they Members of Parliament, company directors or even Ministers of the Crown with thousands of acres and hundreds of thousands of pounds, to say that the worker is greedy to ask for a decent wage increase?

The Prime Minister: The supplementary question is not related to the Question on the Order Paper, which concerns the review boards for civil servants, chairmen and boards of the nationalised industries, the armed services and certain of the judiciary.
The hon. Member has been very free in the figures he has thrown about. First he told the Press that there were increases of £4,000, which was quite untrue. Second, he has constantly referred to an 18 per cent. increase. That figure could


be used only with the intention of being misleading, because the average of these increases over the three years they cover was 6·8 per cent. Perhaps the hon. Member would talk about that to his trade union friends.

Mr. Hunt: Is my right hon. Friend aware that concern on this matter is not confined to one side of the House, that many of use feel that the timing of the award was particularly unfortunate, and that a post-dating to say, 1st January, 1973 would have done much to provide a positive contribution to wage and salary restraint, and might have avoided a great deal of the resentment and misunderstanding?

The Prime Minister: I am sorry to disagree with my hon. Friend, but I do not believe that to be the case, and I must honestly say so. The timing of the review boards' awards is a matter for the boards themselves. They were set up by the Government, and existed under previous Administrations, in an endeavour to find an independent way to deal with this very difficult problem. All previous Administrations have accepted that, unless there were exceptional circumstances, the findings of a board would be accepted as a whole. The Government did that in the case of Members of Parliament, Ministers, and those associated with the House, and it was accepted by Parliament as the right thing to do. I therefore think that it was the right thing to do in the case of the group referred to in the Question and of the doctors. I do not believe that postponing the award for six months, after there had been an earlier staging over three years, would have made that much difference.

Mr. Harold Wilson: Having regard to the concluding words and tone of the Prime Minister's reply to my hon. Friend the Member for West Ham, North (Mr.Arthur Lewis), would the right hon. Gentleman consider in future replying to questions by hon. Members without these petulant outbursts? In view of the importance of the meeting which he is to hold tomorrow, will he reconsider those last few words which he threw at my hon. Friend?

The Prime Minister: I was pointing out to the hon. Gentleman his constant misleading of the public outside and those

in trade unions by giving false figures. Talk of a £4,000 increase, which was not the review board's award, and of an 18 per cent. increase, as if it were an award for one year like most trade union awards, is completely untrue. The General Council of the TUC, which had discussions with me a week ago, has not raised the question at all, because I believe that the trade union leaders fully understand the position.

EDUCATION POLICY (MINISTER'S SPEECH)

Mr. St. John-Stevas: asked the Prime Minister whether the public speech made by the Secretary of State for Education on 23rd June to the Annual Conference of the Association of Education Committees on educational matters represents Government policy.

Mr. Clinton Davis: asked the Prime Minister if the public speech of the Secretary of State for Education and Science to the Conservative National Advisory Committee on Education in London on 24th June, 1972, on educational policies represents the policy of the Government.

The Prime Minister: My right hon. Friend's purpose in these two speeches was not to announce decisions but to set out the issues and choices in the future allocation of resources for the education service. It is the Government's policy to encourage public discussion of these important issues whenever possible.

Mr. St. John-Stevas: I thank my right hon. Friend for that reply. Is not the significance of the speech referred to in my Question that it constitutes a major contribution to open government, because my right hon. Friend the Secretary of State for Education and Science discussed in it the options and priorities open to the education service? May we see her example copied by other Ministers?

The Prime Minister: I understand that the speech was greatly appreciated by the Association, because it set out very clearly the forecast of various kinds of expenditure on the different options now available in the education service. I believe that in advance of the public expenditure White Papers this performs a very useful service. The answer to the last part of my hon. Friend's supplementary question


is that the technique has already been adopted in taxation by my right hon. Friend the Chancellor of the Exchequer, as it has been in research and development, in health matters by my right hon. Friend the Secretary of State for Social Services, and in other matters by other Ministers.

Mr. William Hamilton: Will the Prime Minister consider the possibility of each Department publishing a Green Paper on the respective priorities within it, in line with the speech made by the Secretary of State for Education and Science, which was very much appreciated, about the allocation of resources as between nursery education and further education? It would be a very useful exercise if all Departments would publish their own Green Papers to foster public discussion.

The Prime Minister: I agree with the hon. Gentleman. We have been considering this for all Government Departments, but the opportunity does not occur in the life of a Department at exactly the same moment for each one. There will be certain points on which policy decisions must be taken earlier, though it is very useful to give the public the options and choices and to state what expenditure will be involved in each.

Mr. John E. B. Hill: Does not my right hon. Friend agree that, even granted a greater measure of educational efficiency, it is implicit in the figures which my right hon. Friend gave in her speech that education will have to take a somewhat larger share of public expenditure in future, particularly if we are to achieve a better balance between pre- and post-school education?

The Prime Minister: As I think my hon. Friend knows—he has probably read the speech in full—my right hon. Friend gave the extent to which educational expenditure had increased and indicated that there would be great demands on Government expenditure for further developments. Her point was, I think, that obviously not all those developments could be carried out at the same time, and she indicated that a great emphasis should be given to younger children. The need for this had been shown by a number of recent inquiries.

Mr. Douglas: Does the Prime Minister concede that we should be very careful

in looking in terms of priorities at the extension of the Open University to take 18-plus pupils, which was not within the general concept of that institution when it was formed?

The Prime Minister: That is a point which is new to me, because, as the hon. Gentleman says, that was not the purpose of the Open University when it was set up. Nevertheless, it could well be looked at, and I will certainly arrange for that to be done.

Mr. Harold Wilson: On the question of the Open University, is the Prime Minister aware that a figure of about 700 or 800 has been put into the 18-years category? Is he aware that this side of the House is very pleased that the Open University has been maintained? It is proving a tremendous success, but there is anxiety, both within it and more widely in universities, as shown by the resolution of the Association of University Teachers, that it will be used to economise on what would be the required expansion of more traditional universities?

The Prime Minister: I have seen that anxiety expressed. One of the purposes of my right hon. Friend's speech was to point out the various implications of continuing the Robbins principles as they were originally set out in the Commission's Report, on various assumptions about university entry, and the impact of those on Government expenditure. That was one of the issues about which my right hon. Friend wanted to have public discussion.

TRADES UNION CONGRESS

Mr. Duffy: asked the Prime Minister if he has agreed to the request of the Trades Union Congress General Purposes Committee for an urgent meeting on matters of mutual concern.

The Prime Minister: Yes, Sir. I met the General Council of the TUC a week ago on 4th July.

Mr. Duffy: In view of the prompt and unqualified acceptance yesterday by industrial leaders of the right hon. Gentleman's invitation to join the tripartite working party, and presumably his anxiety for a similar response tomorrow


from the TUC, will the Prime Minister indicate what grounds trade unions have for expecting that such a future relationship will always be conducted on a voluntary basis, given his Government's crucial departure from the principle of voluntarism in industrial relations?

The Prime Minister: I do not believe that those two things are comparable. This was not a point which was made to me by the General Council of the TUC. If Parliament passes legislation, as it has done, it applies to all citizens, including those in the trade union movement. What I emphasised to the General Council was that as a Government we wanted free, voluntary negotiations to continue in wage bargaining, and that I always understood that that was a principle to which the trade unions themselves attached great importance. The General Council agreed with that, and I hope therefore that it will feel able tomorrow to accept my invitation.

Mr. Biggs-Davison: Is there not a long history of fruitful co-operation between Conservative Governments and the trade union movement? Is not the trade union movement full of patriotic people who want the good of this country, and is it not therefore in the interests of the country that fruitful discussions should now take place between the Government and the representatives of the trade union movement to try to see that the economy proceeds on sound lines for the benefit of everyone?

The Prime Minister: Yes, Sir. There has been a considerable number of meetings between the General Council, the Economic Committee and the General

Purposes Committee of the TUC with myself and my colleagues over the past two years. These have been valuable. The House knows of the invitation which I gave to the TUC last Wednesday, which it is considering further tomorrow. Its main purpose in coming to see me was to discuss the Industrial Relations Act. I expressed the Government's view on that in the debate in the House on Monday of last week, and I discussed with the General Council again the position which I have set out.
I should also make it plain to the House that, as the right hon. Member for Blackburn (Mrs. Castle) has pointed out to me, although I said in that debate that the cooling-off period was kept in the Bill which was presented by the Labour Government but never carried through the House, in fact that was not the case. Neither a ballot nor a cooling-off period was transferred from the White Paper into the Bill. I am glad to make that plain.

Mr. Bidwell: If the right hon. Gentleman has not yet discussed with TUC representatives the effect of the devaluation of the £ on the rising cost of living as a result of the inevitable increase in import prices, will he now explain to it and to us how the Government expect to meet that situation?

The Prime Minister: I discussed the floating of the £ with the General Council—and the events which had led up to that—and the Council appreciated that one cannot say at this period of time what the course of floating will be. It showed no signs of wishing to exaggerate the consequence on prices of the floating of the £.

AIR POLLUTION

3.32 p.m.

Mr. Neil McBride: I beg to move,
That leave be given to bring in a Bill to increase the powers of the Alkali Inspectorate in cities in order to reduce or eliminate the emission of all waste or toxic gases which pollute the atmosphere; and for connected purposes.
The great expansion of the chemical and other industries has seen the people of Britain becoming aware of the possibility of environmental damage, harmful to the ordinary citizen, by the seemingly uncontrolled pollution of the atmosphere. [Interruption.] The emission of waste and toxic gases and other noxious matters is now the subject of intense public discussion. [Interruption.] The rôle, numbers and location of the members of the Alkali Inspectorate are matters of public debate in many areas of the country including my constituency. [Interruption.] With——

Mr. Speaker: Order. I point out to hon. Gentlemen leaving the Chamber that the hon. Member is entitled to be listened to in silence.

Mr. McBride: Only 24 members of the inspectorate are listed in a Parliamentary Answer given on 26th May. That figure in operation in Britain seems to be an inordinately small premium to pay for such a country. The emission of sulphur dioxide, sulphur trioxide, fluorine and other odoriferous, health-damaging gases occasioned by technological advances in industry, particularly in chemical manufacturing processes, the incineration of toxic wastes and industrial materials, creates in modern conditions the necessity for a reappraisal of the rôle of the Alkali Inspectorate, which is now different from its rôle when it was set up under the 1863 Act. It is very different, too, from the days of 1906 when the Alkali and Chemical Works Regulation Act was passed.
The Act, in dealing with the appointment of inspectors, has no definition of any qualifications. Modern industrial conditions make this a necessary prerequisite of appointment which should be incorporated in law. The number of inspectors must be increased to permit the inspectorate to be located in the principal cities of England and Wales. In Wales

there are only three such inspectors. There is no inspector stationed in the second city of the Principality, part of which I have the honour to represent.
The law must ensure that the inspectors, in dealing with emissions to the atmosphere, work on levels determined by Government scientists to ensure that the levels of emissions do not constitute a hazard to health. The standards of emission should be published, as should all agreements entered into between industry and the inspectorate. In discussing and formulating such agreements the inspectorate should be empowered to act in conjunction with the local authorities. This is a three-way process.
There should be incorporated in the Bill the power to set up permanent testing teams within the inspectorate for special duties within the conurbations. The inspectorate should be empowered by law to publish the location of the head office of the inspectorate and the identity, address and telephone number of the inspectors. This is a matter of public interest, and such information should be carried in all publications listing personnel of Government Departments.
It should be written into Statute that all monitoring instruments should be erected under the supervision of members of the inspectorate, and all arrangements for the location of these instruments, the collection and the assessment of instrument-recorded readings should be the sole responsibility of the inspectorate. The inspectorate should be invested with powers making it the watchdog over the health and legal rights of the community at large in all matters affecting the purity of the atmosphere, and it should submit for debate to this House an annual report. The inspectorate should be empowered to compel all plant in its area of operation to reach new standards of safety in the elimination of emissions causing air pollution, such standards to be laid down by Government scientists. The inspectorate should also be empowered to control any industry which does or might emit air-polluting gases. That control should be absolute and comprehensive.
In 1970 1,621 companies were required to register under the appropriate Act and to be subject to the supervision of the inspectorate. When we look at the numbers of the inspectorate the need for


more inspectors becomes apparent. It should be invested with legal powers to make public all the facts relating to emission data. In the United States there is a tough and brutally uncompromising attitude towards air pollution. In one State emissions are prohibited by law and companies have to post performance bonds from which are deducted the penalties imposed by the court. We should follow that example, which also applies in the case of breakdowns.
Where factories fail to reach the required standard after going into production, there should be a legal requirement upon them to do so. At the recent Stockholm conference a report prepared by the U.S. State Department mentioned the problem posed by the emission from the motor car. The report said:
Motor vehicle hydrocarbon and carbon monoxide emissions from 1975 models be governed by standards which require a reduction of 90 per cent. from emissions allowable under 1970-model-year standards. The 1976 models shall conform with standards requiring a 90 per cent. reduction of oxides of nitrogen.
In the First Report of the Royal Commission on Environmental Pollution at paragraph 75 it was stated:
There is uncertainty about the long-term effects of exposure to low concentrations of the gases emitted by motor vehicles. The Air Pollution Unit of the Medical Research Council is working on this problem.
The American proposals might well be incorporated into our legislation with advantage. The present legal description of using "best practical means" to combat air pollution was all right 66 years ago but industry has progressed since then and conditions obtain now which were unknown at the time of the framing of the original Act. This indicates the need for legislation to supersede the obsolescence of the present Statute. The

Bill would stimulate the interest of the public and industry and induce the co-operation of all concerned to ensure the control of air pollution.
The easy anonymity and standards of Victorian times must be replaced by emission laws of the 20th century. The time has come for the inspectorate to "go public" and take the public into its confidence. Laws should be made with public knowledge so that the standards of the Government scientists are fairly and publicly applied in the interests of the whole British public. As the Alkali Inspectorate is officially described as Her Majesty's Alkali and Clean Air Inspectorate, it must be invested with powers clearly defined by and enforceable at law for the maintenance of the purity of the atmosphere. The air we breathe should be clean and fresh; there should be no contamination. In my view it would be the wish of the British people that legislation should be enacted to achieve this.

Question put and agreed to.

Bill ordered to be brought in by Mr. McBride, Mr. Alan Williams, Mr. George Thomas, Dr. John Cunningham, Mr. Crosland, Mr. Roy Hughes, Mr. John Morris, Mr. Coleman, Mr. Frank Allaun, Mr. Orme, Mr. Heffer and Mr. Brian Walden.

AIR POLLUTION

Bill to increase the powers of the Alkali Inspectorate in cities in order to reduce or eliminate the emission of all waste or toxic gases which pollute the atmosphere; and for connected purposes, presented accordingly and read the First time; to be read a Second time upon Friday, 28th July, and to be printed. [Bill 174.]

Orders of the Day — FINANCE BILL

As amended (in the Committee and in the Standing Committee), further considered.

Clause 1

VALUE ADDED TAX

3.43 p.m.

The Financial Secretary to the Treasury (Mr. Terence Higgins): I beg to move Amendment No. 1, in page 2, line 2, leave out from 'Commissioners' to end of line 6.
The Amendment arises from the first discussion we had in Committee on the Floor of the House, when my right hon. Friend the Chancellor of the Exchequer, referring to the passage which is covered by the Amendment, said that there had been a misunderstanding about the effect of subsection (2) as drafted. He pointed out that it was based closely on the purchase tax precedent, and its purpose was solely to make value added tax an assigned matter within the meaning of Section 307 of the Customs and Excise Act, 1952. In common parlance, it was something for the Commissioners of Customs and Excise to deal with. The effect of making VAT an assigned matter is to give the Commissioners certain general powers and duties and to bring into operation certain general legal provisions as set out in the 1952 Act.
We are now advised that this purpose is sufficiently achieved by the words at the beginning of subsection (2):
The tax shall be under the care and management of the Commissioners
without the passage which the Amendment seeks to delete.
The passage which the Amendment seeks to delete gave rise to misapprehension that the broad enforcement powers of the Commissioners would be incorporated by it into the Bill, whereas, as the House will understand more fully after our debates in Committee upstairs on the various enforcement provisions, the position is that those powers are taken explicitly in the various Clauses concerned with collection and enforce-

ment—Clauses 30 to 39, and Clause 40, which deals with appeals.
My right hon. Friend recognised that there was some misunderstanding about this. We feel that the Clause with the Amendment will meet the point we wish to make and, at the same time, set at rest the fears which were expressed. I hope that the House will feel it right to approve the Amendment which is a direct response to the views expressed in Committee on the Floor of the House.

3.45 p.m.

Mr. Ian Percival: I am one of those who felt some apprehension about the Clause as it was originally drafted, and I therefore thank my hon. Friend and my right hon. Friend the Chancellor of the Exchequer for the attitude which they have adopted and the action they have taken. Yesterday the Government introduced two new Clauses to meet points raised by hon. Members on both sides of the House, and it is refreshing to find this attitude of co-operation and a willingness to give ground when they are satisfied that genuine apprehension is felt.
I do not want my hon. Friend to feel that this will terminate the correspondence that I and others have had with him and his right hon. Friend on other points. At the same time, I wish them to know that I and others of my hon. and right hon. Friends who raised the point met by the Amendment greatly appreciate this refreshing attitude of seeking to meet genuine apprehensions.

Mr. Robert Sheldon: The hon. and learned Member for Southport (Mr. Percival) spoke of the refreshing nature of the Government's willingness to give ground. I wish that the Opposition had been likewise refreshed. During the whole of our discussions on VAT the abiding impression that remained with us was of the inflexibility of the Government and their feeling that they had achieved a perfection rarely to be found in any legislation coming before the House.
I express my welcome for the Amendment, although the Financial Secretary must be aware that the apprehension to which he referred was not allayed as we went on to discover what lay in the rest of the Bill. We saw that in Clause 1


there was a degree of overkill and excessive severity. When we came to Clause 39 we saw that it enshrined Section 290 of the Customs and Excise Act, 1952. I remind the House that this Measure provides that when the Commissioners decide to bring a defendant to court he shall be guilty unless he is able to prove his innocence. Although that provision is repugnant to all, it applied only to just over 50,000 people, whereas now it is to apply to about 2 million people.
In Clause 38(3) we found that if it had been deduced that a person's conduct must have involved the commission of offences, even if those offences were not known, he could be found guilty. Clause 34 imposes an immense burden upon small firms to keep records, and the Commissioners have power to enter and to seize articles. Under Clause 36 the Commissioners have power to take away samples from any trader and to keep them if they so wish. The Commissioners have all these powers, and, in addition, they have the powers in Clause 1. It is unnecessary to have these powers in Clause 1 when they are already scattered throughout the Bill.
If the hon. Member for South Angus (Mr. Bruce-Gardyne) were here, no doubt he would say that I should congratulate the Financial Secretary on presenting the House with a "crock of gold". But what has happened is that the Treasury has become a little ashamed of the excessive power it has been claiming in the Bill. It has been shamed by the arguments put forward both in Committee and in the House and is now seeking to do something about the situation. It is not a matter on which we should be overjoyed, but we should accept it. We must congratulate ourselves on the effect of our arguments on the Chancellor of the Exchequer.

Amendment agreed to.

Clause 3

DEDUCTION OF INPUT TAX

Mr. Joel Barnett: I beg to move Amendment No. 8, in page 4, line 22, at end insert:
'Provided that no input tax should be disallowed by order in respect of sanitary ware or other articles of a kind ordinarily installed

by builders as fixtures as referred to in Item 3, Group 7 of Schedule 4 of this Act'.
This Amendment deals with house building. As the Bill is drafted, houses including fixtures which are ordinarily installed are zero-rated, but the problem is what exactly is meant by the words "ordinarily installed". This could be thought to mean that builders might ordinarily install fitted carpets, refrigerators, television sets and other things. When we debated the supply of builders' materials we were told that it would be an easy matter to define what is ordinarily installed because it would be up to the builders' merchants to decide when supplying goods whether or not they were ordinarily installed.
In Clause 3 the Government are taking powers to disallow by order certain inputs. They have the power where there is abuse, to decide that some inputs should be disallowed. I have no desire to prevent the Government seeking to stop the sort of abuses they have in mind. The only specific instance which has been given of how they will use the order is that they will not allow as an input the purchase of motor cars and entertainment expenses. I fully understand why such items of expenditure would be disallowed.
The Government might wish to use the powers in the Clause to prevent abuses by builders who sought to install items which are not installed at present, such as those to which I have referred. The Government are taking quite large powers to remove—at a stroke, or at a 1½ hours' debate—something which is now zero-rated or now allowed as an input.
The House should not lightly give these powers, and I hope we shall be told what sort of abuses it is felt builders will employ to get round the provisions of the Bill—in other words, to manipulate the legislation to their advantage and possibly to an advantage of house purchasers who will be able to purchase the contents of a house somewhat cheaper than otherwise.
Is it possible that the Government have learned through the grapevine and through their contacts with the building trade that some builders are getting ready to install gold-plated bathroom fittings and television sets which will be installed free of VAT, and wish to use these


powers to disallow those inputs? I would be very much on their side if this were their intention, but I understand them to argue that the line would be easy to define between what is and what is not ordinarily installed by builders.
Let us take a situation in which the circumstances might not be easy to define; for example, a builder who constructs an average small modern semi-detached house. The Chancellor of the Exchequer will know that in the North-West of the country, in my own area, such houses are constructed at a price that is very different from the price of a house built in the South, since in my area one can still get a house for around £4,000. Builders as a general practice install in such houses sockets for plugs. Suppose they took it a step further and decided to install light fittings. Would this be considered an abuse of the words "ordinarily installed"? Many builders put in kitchen equipment, cupboards, sinks and so on, and one assumes that such fittings would be considered to be ordinarily installed and, therefore, not subject to VAT. Perhaps the Financial Secretary would advise us on this matter.
Suppose a builder in a more expensive house decided to include washing machines, which he might be able to install at a much cheaper price than that which the prospective purchaser would pay outside because the builder would be able to buy such items in reasonably large quantities. If that machine were considered to be ordinarily installed, it would be a method of avoiding VAT on that piece of equipment.
Many builders fit different kinds of electrical gadgets in houses which are being built. It is possible that at the same time they might consider installing a television set to be sold as part of the contents of the house. It would make things much simpler for the purchaser, because he could buy the set not on hire purchase over three years but on mortgage over 20 or 30 years. Would that sort of item be considered to be ordinarily installed? It is important that the Financial Secretary should spell out what is intended by this provision.
I have no wish to assist in evasion or avoidance of taxation on the sort of scale which might ensue, but, on the other

hand, there could equally be a serious problem for contractors. It is important that when fixing the price of the house they should know whether or not a particular item of supply in that house will be allowed as an input. In other words, if it is to be allowed for them ordinarily to install kitchen cupboards and to incorporate them in the price of the house, and if that is to be allowed as an input, then it is important for them to know the situation.
On the other hand, if such an item is eventually to be disallowed and the builder discovers that information nearer the time when he has to deliver the house, this could cause considerable difficulties for the builder and indeed for the house purchaser, with whom I am much more concerned. It would not matter so much for a taxable trader because he would be able to claim for VAT on any input and there would be no problem in those circumstances, but where the house is built invariably for someone who will not be a taxable trader, it is important for the house builder, the contractor, to know how many and which of the items which he considers he is ordinarily installing are items which might be disallowed under the provision.
I move the Amendment largely to sort out the Government's intention and to help the trade know where it is likely to stand.

4.0 p.m.

Mr. Higgins: In responding to the points raised by the hon. Member for Heywood and Royton (Mr. Joel Barnett), I do not think the hon. Gentleman would wish me to go into detail on the provisions of the Amendment. Perhaps he will regard the Amendment as what came to be known in Committee as a "proving" Amendment. Perhaps by the end of the day in Committee we were a little clearer than we were at the beginning about the difference between a "proving" Amendment and a "probing" Amendment. At all events, it is the intention of the Amendment to seek clarification of the Government's position on this issue, and I willingly respond to the invitation.
The argument is what is called in jargon terms "the fitted carpet" argument. Perhaps we might use that as a shorthand expression. The Government's intention is to relieve from VAT items


of a kind ordinarily installed by builders as fixtures when they are supplied in connection with the sale of a new building or in connection with the construction, alteration or demolition of a building. That intention is achieved in Schedule 4, Group 7, Item 3, regarding the construction of a building on land not owned by the builder. It is intended to maintain parity of treatment with houses built by builders on land which they own which are then conveyed to the client with the freehold of the land by making an order under Clause 3(6).
It may be helpful to distinguish between the case when the building is on the client's land and when the building is put up on the builder's land. The position under the Bill is that articles of a kind ordinarily installed by builders as fixtures are taxable under the Government proposals, except where they are supplied in connection with the sale of a new building, in which case they are zero rated under Schedule 4, Group 7, Item 1, or where they are supplied in connection with the construction, alteration or demolition of a building, in which case they are zero-rated under Schedule 4, Group 7, Item 3.
There is no problem about the treatment of articles of a kind ordinarily installed by builders as fixtures. Where there might be a problem is in the treatment of articles of a kind which were not ordinarily installed by builders as fixtures but which were occasionally installed, possibly, as the hon. Gentleman will recognise, for tax avoidance purposes, to benefit from the zero rating for new construction. The hon. Gentleman cited a number of examples where a builder might install in the building something which is normally added after it has been constructed and subject, therefore, to tax—at the moment purchase tax, or, in future, value added tax.
I turn now to the position of articles installed by builders on the client's own land of a kind other than those ordinarily installed by builders as fixtures. Articles installed in connection with services in the construction, alteration or demolition of a building will be excluded from the zero-rate under Schedule 4, Group 7, Item 3. This means that articles such as built-in washing machines, television sets or fitted carpets will be taxable when installed in a building constructed on

the client's land. No further provision is needed in these circumstances to ensure that such articles axe taxed. There is, however, a complication, as the hon. Gentleman recognised if the builder is building on his own land and then conveying the house. Where articles other than those installed as fixtures are installed in a building which the builder is constructing on his own land, then the sale of the building and the land will be zero rated under Schedule 4, Group 7, Item 1. The item would cover any articles installed as fixtures and forming part of the conveyance. That is the point worrying the hon. Gentleman. As Item 1 stands, a builder who was engaged in speculative building would be able to supply at the zero rate anything which he was willing and able to install in the house. This could give rise to the problem to which the hon. Gentleman has referred. If nothing were done, there would be an anomaly in the treatment of such articles, depending on whether the builder owned the land on which he was building or did not. That could give rise to a serious leakage of revenue, as is recognised by the hon. Gentleman.
I respond to the hon. Gentleman's invitation to set out our intentions because it was pointed out in Committee that it would be helpful if, at an early stage, we gave Parliament an indication of what our proposals would be on Orders. To bring the situation where a completed building is sold into line with the situation where construction services are supplied on the client's land the intention is to make an order under Clause 3(6). The hon. Gentleman will rightly say "What have we in mind as far as that order is concerned?" We will make an order which will need an affirmative Resolution. I stress that fact. Under such an order, builders will not be entitled to deduct the tax which is charged to them on articles other than those of a kind ordinarily installed by builders as fixtures.
The hon. Gentleman will immediately say that that is a circular argument. I shall break the circle by taking the example of a television set. The distributor will charge the builder tax, the builder will be unable to deduct or reclaim the tax and, though the sale of the house with the television built in will be zero


rated, the price the builder charges will reflect the element of tax on the television which the builder has borne. I think that is clear.

Mr. Joel Barnett: I follow the example the hon. Gentleman has given, but there is the point that presumably the builder will be buying the television at a cheaper price than the price at which it could be bought by the ordinary man in the street. Therefore, the level of VAT will be cheaper. There is no uplift as there is in purchase tax. In other words, the person buying the house including the television set would presumably get it rather cheaper than he would otherwise do.

Mr. Higgins: We always run into the same trouble as to whether the Opposition are in favour of prices going down. However, I do not make any broad political point on that. If the builder, in buying these items, does so in quantity, and thereby secures economy of scale, then, as the hon. Gentleman rightly says, the tax will be disallowed and the builder will therefore seek to recoup that in the price. It may be that the item is obtained by the purchaser of the house at a lower rate, but that is so in many circumstances where a person buys in quantity and sells at a lower price. As the hon. Gentleman rightly pointed out, that is one of the advantages of value added tax as against purchase tax. When things are supplied at a lower price, there is not the uplift of the kind which we have with purchase tax.
I will conclude my ground-clearing exercise, if that is not the wrong expression in this context, before I turn to the specific points which the hon. Gentleman has raised.
Taking the example of a television set, the distributor will charge tax to the builder. The builder will be unable to deduct or reclaim the tax and though his sale of the house with the television built in will be zero-rated, the builder will have made a corresponding increase in the price, which is reflected in the price paid by the purchaser of the house. The intention is to make an order under Clause 3(6) which will take effect from 1st April, 1973, in respect of articles installed in houses. I shall not digress on to the question of industrial buildings, where different considerations apply.
The hon. Gentleman the Member for Heywood and Royton asked what was the scope of the expression "articles of a kind ordinarily installed by builders and fixtures". We thought it right to use a general term which has already been judicially considered under purchase tax and which is sufficiently flexible to reflect changes in building practice and national habits. This is an expression which has been before the courts on previous occasions. Therefore, there is an element of experience here from which we can benefit. That is why we have used that expression. It is based on a similar form of words used to exempt certain items of furniture from purchase tax.
One of the advantages of VAT will be to get rid of some of the bad purchase tax line-drawing problems: under VAT that phrase will apply to articles other than furniture. Whereas the purchase tax exemption applied to the articles concerned whatever the circumstances of the supply, under VAT the relief will apply only when the articles are supplied either in connection with the sale of a building or in connection with construction, alteration, or demolition.
The crucial question is: where will the borderline be drawn? That is a difficult question. The Customs and Excise department has, as part of its broader consultations, discussed this with the trade associations concerned and it proposes to issue a notice concerning construction, which will give guidance and examples of what is and what is not regarded as "ordinarily installed". Examples of what would be covered are bathroom fixtures, sinks, work units and cupboards, central heating equipment, water heaters; whereas items such as washing machines, fitted carpets, television sets, cookers will not be so regarded.
What has happened? We have carried out consultations with the trade. The department of Customs and Excise will be issuing a notice which will seek to give guidance on that. That will be subject to appeal to the VAT tribunal if there is a dispute upon it.
In the past the practice has been to deal with this on a judicial basis. It is not a concept which is wholly unfamiliar to the courts. We believe that is the best way of setting what is unnecessarily a difficult line-drawing problem. This will


prove in practice a workable way of setting about things.
We hope that the Opposition will not feel it necessary to press this Amendment to a division. Should they do so, other complications will arise. In some respects the drafting is complicated.

Mr. Alexander W. Lyon: Could the Financial Secretary clear one matter up? This depends upon different impressions of house building. There is a greater tendency towards building package houses. Kitchen equipment is being built into buildings. If that process goes on and if meanwhile the Customs and Excise or the VAT tribunal has ruled against the installation of one type, will the VAT tribunal be able to overrule itself on this matter and allow for the change in fashion, or shall we be rigidly limited according to the decisions of the tribunal?

Mr. Higgins: The hon. Gentleman's point concerns a difficulty. One of the advantages we saw in dealing with it in this way is that fashions change. What is normally fitted may change between 1850 and 2000.
The department of Customs and Excise will be publishing a notice showing what it considers to be "ordinarily fitted" at this moment. That line may not in the event turn out to be where the Customs thinks it is, depending on how the tribunal, if the case does go to appeal, decides.
Fashions may change in the course of time. It may well be felt right to take something to the tribunal again. This enables one to adopt a more flexible approach which will reflect changes in building practice and national habits. That would commend itself to the House.
The alternative would have been to write into the Bill rigorously and exactly what is and what is not applicable. That did not seem to us either a flexible or a sensible way of setting about these matters.

4.15 p.m.

Mr. Tam Dalyell: The Financial Secretary is in such a sunny frame of mind this afternoon that I hesitate to start nit-picking or line-drawing. But we are dealing with something of importance to a great many people. I understood the hon. Gentleman to say

that, whereas fitted carpets, bathroom equipment and accoutrements are ordinarily installed, somehow a cooker would not be. Have I misunderstood him? In most houses a cooker is ordinarily installed. We do not know of many houses where there is no cooker.

Mr. Higgins: In Committee the hon. Gentleman tended to ask a theoretical question and to follow it with a long pause. We did not feel that that was a satisfactory way of proceeding. We now have something of a difficulty; not being in Committee there is a limit on how often I can intervene, but I respond on this occasion to the hon. Gentleman's invitation.
The crucial question is not whether a cooker is installed but whether a cooker is normally installed by the builder. It would not be our view that that is normally the case. It is a question of publishing a list, and the matter can go to appeal if it is felt necessary.

Mr. Dalyell: Fashions change. More and more people are buying a package when they purchase a house. I would have thought a cooker could be said to be "ordinarily installed". I do not wish to labour the point. Concerning the tribunal, unless one has a series of test cases fairly early on the VAT appeals tribunals will be swamped.
In pursuing the subject of what the Financial Secretary called "ground clearing", when he comes to wind up he can say what is the anticipated burden on the VAT tribunal. Is it in the Treasury's mind to have a series of test cases to give guidance in the early stage, or are we going to have an overwhelming number of appeals throughout the country?
One should look forward to building habits and how they will change. Any lay member knows that building habits are changing rapidly. I see that the hon. Member for Folkestone and Hythe (Mr. Costain) is longing to contribute to the debate. Perhaps he will have something to say on that subject.
Dramatic changes are taking place. What costs are we dealing with here? If we say cookers are not "normally installed", and within reason extend the exemption to cookers and a number of other items which are sold in the package, how much would it erode the revenue


if a much more generous view is taken? It could save a vast amount of administrative costs. If the Treasury takes a more generous view of what is ordinarily installed, and include cookers, curtains, fitted carpets, how much would it erode the revenue? Has any calculation been made to establish the sum involved?

Mr. A. P. Costain: I approach this point as a builder. The hon. Member for West Lothian (Mr. Dalyell) said that I was impatient to intervene. I did not rise when the Amendment was first moved because I wanted to hear what my hon. Friend the Financial Secretary said.
I do not support the Amendment because I believe it to be too restrictive. Once we start setting out items which should not be excluded, we imply that we intend that everything else shall be. When my hon. Friend spelt out what he proposed might be allowed he had regard not only to the historically changing patterns of the building industry but to the fact that in different parts of the country there are different patterns. My right hon. Friend the Chancellor of the Exchequer, being a North countryman, will realise that even today most people install ranges in houses. A range is an in-built fixture, and I am sure that that would be allowed for VAT. However, if the range is replaced by a gas cooker, I do not see why that, too, should not be excluded.
My hon. Friend the Financial Secretary spoke about making an omnibus order. But what is essential for a flat is not essential for a house. A sink disposal unit is probably necessary in a flat because it saves the local authority certain dustbin clearance expenses, whereas such a unit might be considered a luxury in a bungalow. When the order is made, will it specify which type of building will be allowed or disallowed?
What fun we shall have getting a proper specification for a carpet. When is a carpet a tile? When is a tile a carpet? A tile is normally regarded as part of a building because it replaces a wooden floor. Now there is a fashion for tile-carpets. I was not clear about my hon. Friend's attitude as regards carpets. But I am afraid that we shall get into a hubble-dubble about it.
My hon. Friend referred to his conversations with the industry. Has he had them with the industry in all parts of the country? Can we have his assurance that he will bring in specific orders for specific types of buildings? As a practical person, I can assure my hon. Friend that they will be necessary. He must specify the difference between what is essential for a flat, for a bungalow and for a house.
Equally, when it comes to outbuildings, there are many different patterns in different parts of the country. If my hon. Friend is not careful he will alter the building pattern, just as occurred when different rates of tax were introduced for different horsepowers in motor cars. The result was a new breed of car. If the Treasury intends to reorganise the specifications of the building industry by VAT, we shall have some very peculiar types of construction as a result.
As we go in for labour-saving houses we shall get more and more fitted furniture. I suspect that my hon. Friend may be considering that fitted kitchens should be accepted as part of a building, but not fitted bedrooms. An order late at night is not necessarily the way to deal with problems of this kind. We want some assurances from my hon. Friend that he will have a small panel of experts whom he can consult before arriving at any final decision.

Mr. Joel Barnett: With the leave of the House, perhaps I might take up one or two of the points that have been made.
I am sure that the Financial Secretary will agree that this has been an interesting debate, especially the contributions from the hon. Member for Folkestone and Hythe (Mr. Costain), who has a vast knowledge of the industry.
The Financial Secretary spoke about the advantages of VAT in this respect. I was taken back many months. I thought that we had left all that behind. He said again that the great advantage of VAT as opposed to purchase tax was that there was no uplift. Of course there is not, since the burden falls upon the consumer, whereas purchase tax fell on the wholesale price.
The Financial Secretary said that he was pleased at least that VAT would


remove the line-drawing problems about furniture. I made a note of that remark. I thought at the time that there would be a few new lines. But I did not think that we should hear about them quite so soon. I thought that there would be some demarcation disputes of the kind that we get in many other industries, but the hon. Member for Folkestone and Hythe spelt out clearly some of the terrible demarcation disputes that we are likely to have. What is the difference, for example, between disallowing a carpet and allowing linoleum or a linoleum tile? What is the difference between allowing a sink disposal unit in a flat and not allowing it in a house, or possibly disallowing it for both? Apparently kitchen furniture will be allowed, but why not bedroom furniture?
The hon. Member for Folkestone and Hythe used a phrase that I had not heard previously. He warned that the Government would get into a "hubble-dubble". I do not know the phrase, but I think that I know what the hon. Gentleman means.

Mr. James Well beloved: It is a Kentish expression.

Mr. Barnett: I am sure it is a very interesting one. When we have these demarcation disputes on VAT, we shall all know that the shorthand term for it is a "hubble-dubble".
The hon. Member for Folkestone and Hythe also said that we were likely to have a new breed of houses. I am not sure what he meant by that. However, I have an idea that it could have some very serious consequences. Although we are taking the matter a little light-heartedly, it could be quite serious in its effect on house building generally.
It was not my intention to press the Amendment to a Division, as the Financial Secretary readily understands. But I am pleased that we have had this opportunity of a brief debate. I now beg leave to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 1

VALUE ADDED TAX—REGISTRATION

Mr. Joel Barnett: I beg to move Amendment No. 12, in page 103, line 37, at end insert:
'3. Providing that in computing the amount referred to in 1(b) of this Schedule the annual sales of any branch of a charitable body shall not be taken together with any other branch or the parent body'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this Amendment it will be convenient to consider Amendment No. 13, in line 37, at end insert:
'3. Providing that in computing the amount referred to in 1(b) of this Schedule the annual sales of a local political party shall not be taken together with any other local party or the national party'.

Mr. Barnett: This Amendment deals with the size of exemption for the purposes of VAT. The Government have chosen an exemption limit of £5,000 a year on sales. Amendment No. 12 deals with charities, but the principle involved is identical in the case of political parties, which are referred to in Amendment No. 13. I shall deal mainly with charities. Most hon. Members will consider that, even though we all have a personal interest to declare in Amendment No. 13, perhaps Amendment No. 12 is the most important.
As the Bill stands, we have the rather silly situation that where a branch of a national charity like Oxfam runs an annual fete or bazaar and sells as little as £500 worth of goods, that sum will have to be aggregated with the proceeds of sales held by other branches. It would thus be brought into the VAT net, and, although its sales would be less than the amount of £5,000, it would nevertheless be subject to VAT. The same principle applies, of course, in the case of political parties.

4.30 p.m.

Mr. James Ramsden: I think I can help the hon. Gentleman. Surely this argument is not just about bazaars but also about an even more common thing nowadays—the shop actually conducted by voluntary help selling donated goods on behalf of a charity. That is becoming more and more a method of raising funds.

Mr. Barnett: The right hon. Gentleman's point is absolutely right, and I was coming to it.
I want to make it clear that for me this is not the major problem, nor is it the major problem, as I hope to show a little later, as far as the churches and charities are concerned. It is a comparatively minor aspect of the problem as far as they are concerned. I see that another group of Amendments has been selected to deal with the major problem. Nevertheless, I would not wish to imply that this Amendment is not important. It is very important, dealing as it does in the way I have indicated with the case of bazaars and fétes and, as the right hon. Gentleman has said, the growing number of cases of shops.
In the case of major charities, such as Oxfam and others, each of the branches would be aggregated, according to my reading of the Bill, although I hope I am wrong. In the case of smaller charities, this is probably a marginal problem with which many of them will not be concerned. But other charities will have the difficult task of deciding in a given year whether there has been more than £5,000 worth of sales in a small group of charities that makes up one body. In most cases aggregation would make them liable, and if this Bill remains unamended they will have the ridiculous job of reconstituting all the branches, because, clearly, they would not leave themselves open to paying VAT if they could avoid it, and they could legitimately avoid it.
But it would be a crazy situation to put all the charitable bodies in this country in the position of having to take tax-avoidance measures in order to do a job on which they really should not be taxed. All hon. Members will agree that to put them in that situation would be absurd, and I do not believe that this is what the Chancellor intended. Obviously, the position has to be clarified because, if it is not, each branch of each charity will be put in an impossible situation.
In the case of a small charity which did not know whether its sales were going to be over £5,000 a year and, therefore, subject to a tax of 10 per cent. there would be a serious disincentive to fund-raising. A particular group of charities, although not the very big ones, might realise that if their sales amounted to £5,000 in a year they would be free from VAT but if they

sold £5,500 worth of goods they would have to ask their customers to pay £550 VAT on the extra £500 of sales. If they did not charge it directly to their customers, which would be difficult in the case of a charitable shop, fete or bazaar, they would be liable to pay one-eleventh of the amount of their total sales. They could not charge it on their invoices because they would not issue invoices in the normal way. So they might well decide that the extra £500 worth of sales was just not worth going for.
I cannot imagine that it is the Chancellor's intention to have this effect on charitable bodies and the many thousands of voluntary workers who do such magnificent work throughout the country, but that could well be the situation.
I should like to deal briefly with one or two examples. All hon. Members will know of the great problem which is going to be created because the charitable bodies sell donated and second-hand goods. Quite apart from the accounting problem if they were left subject to VAT, which would be a terrible imposition on voluntary workers, it must be asked whether the public would want to pay VAT on second-hand goods which they knew had already been subjected to that tax.
There is the further absurd anomaly of the lady who knits a jumper, pays the tax on the wool and donates the jumper to a charity for sale. That jumper would then be subject to VAT, and she might well think twice about knitting it at all; I hope not, but there may well be people who would. I cannot think that that is the intention of the Chancellor.
Again, this could have a very serious effect on charities at their bazaars and fêtes, in particular where people arrive with small amounts of money, with the intention of spending perhaps £1, because that is all they can afford. This would mean that all the charity would receive would be 91p. I cannot imagine that that is the Chancellor's intention.
Then there is the silly anomaly that if one makes a gift of a silver teaset to a charity, which then sells it, that teaset is subject to VAT; but if one makes a gift of shares it is free from capital gains tax. I am not making any point about whether there should be that freedom


from capital gains tax; I have already welcomed the relief given to charities in this direction; but I cannot imagine that that is the way the Chancellor intended his tax to work. Again, if these charitable branches are going to be subject to VAT, so are the entrance fees when they have fund-raising functions at the first night of a film or a show. I fear that the psychological effect on voluntary workers could be substantial.
The Amendment which I am moving now is no substitute for the major Amendments that will be moved later. Many hon. Members on both sides of the House have Amendments down about this. Exemption is in many ways an unsatisfactory way of relieving charities from tax, because, as we all know—although it was not clear to many in the country and I imagine it is still not clear to some—one of the hubble-dubbles of this tax, to borrow the expression used by the hon. Member for Folkestone and Hythe (Mr. Costain), is that exemption is not exemption; that is to say, there will be an element of VAT in it even when there is exemption. So exemption for charities is, for that reason, not a very satisfactory method of relieving them from tax. However, it would go some way towards helping, particularly the small branches of the larger charities. Above all, it would be especially helpful in stopping double taxation on gifts which have been given to charities and resold. It would also remove some of the worst forms of anomalies. I have referred to some already. It would make life easier for charities. However, the only real way to help we shall come to later when I hope the House will agree to relieve charities altogether of this tax.

Mr. Peter Rees: In this debate it is not necessary to go into the thorny question of how far charities should be exempted or zero-rated. Frankly, somewhat sweeping claims have been made for totally exempting the trade or trades carried on by charities in new goods, although I see the force of the suggestions by the hon. Member for Heywood and Royton (Mr. Joel Barnett) for excepting sales of second-hand goods. On this point I ask my right hon. Friend the Chancellor to consider how liberally the Customs and Excise could operate Clause 14 on sales by charities of second-hand goods collected by their members.
I am concerned about the practical implications of leaving charities within the value added tax net. Certain sophisticated and well-organised charities—one might mention Oxfam or Save the Children Fund—which have paid organisers and many helpers could no doubt cope with the burden of keeping records and accounts and accounting for value added tax. However, many charities which depend at local level on devoted bands of amateurs, often few in number. Would they have to keep for three years the accounts which the Customs and Excise might require? I ask, almost in jest: would the Customs and Excise require such charities to deposit security before organising a fete? Of course not. But there are all kinds of practical implications.
I hope my right hon. Friend will consider some kind of relief for such charities on the lines suggested. There is a precedent in the Bill. Clause 23(1) enables companies trading in separate divisions to register each division. Some charities are incorporated as companies. It may be that the Customs and Excise would regard such charities trading at local level as operating in separate divisions. However, many other charities are not incorporated but depend on some trust deed. They are based on a fiduciary relationship. They would not be covered by that Clause. As the hon. Member for Heywood and Royton pointed out, it would be possible to reduce them to small entities within the £5,000 limit by setting up a series of individual settlements, each individual trust paying over its proceeds to the central headquarters. This seems an unnecessary, troublesome and complicated solution to a simple problem. Therefore, I very much hope that on these practical and compassionate grounds my right hon. Friend will find it possible to offer some relief on the lines of this Amendment.

4.45 p.m.

Mr. Dalyell: I hope the House will forgive me if I speak at slightly greater length than I normally do.
First, I should like to refer to what the hon. and learned Member for Dover (Mr. Peter Rees) said about Oxfam. He said there may be some charities like Oxfam which perhaps could cope with the administrative burden. Those of us who went to the meeting organised by Oxfam


on 6th July will recall that the administrative burden was one of the major points made by Mr. Kirkley and his colleagues.

Mr. Peter Rees: I am willing to retract that. I have no detailed knowledge of the administration of Oxfam. I was comparing it in my mind with Guide Dogs for the Blind in my area, which I know is less well organised although equally enthusiastic for its cause.

Mr. Dalyell: I should like to underline the hon. and learned Gentleman's argument. I was about to say that if Oxfam cannot cope, what about local branches of Guide Dogs for the Blind, Lifeboat, and those myriad other charities which we know so well?
Oxfam says:
All the charities which disperse goods and services in this country—like The Spastics Society—will suffer considerable rises in costs under the workings of VAT. Charities such as Oxfam which raise large sums of money through sales of donated goods in charity giftshops will be subject to a levy of 10 per cent. VAT on shop income. This will seriously affect the amount they have to spend on helping the poor, the hungry, the disabled, and the needy. Oxfam alone may have to hand over £150,000 in VAT levies on giftshop sales next year.
In the questioning that went on a week ago at the meeting in Westminster Hall I was convinced it was not exaggerating. Oxfam makes the point:
For the millions of British people who support deserving causes in cash, kind, time and energy, this is indeed a depressing prospect.
I echo what was said by the hon. and learned Member for Dover about the psychological consequences. At branch level there is a problem. My hon. Friend the Member for Portsmouth, West (Mr. Judd) is interested in this point. I will not take a South of England point. I should like to go on with Oxfam and the worries of the Scottish branch. Miss Delia Halloran of 80, Hanover Street, Edinburgh, the Scottish Secretary of Oxfam, who is well known to many of us, says:
Why are the Government now breaking the traditions of special treatment over taxation of charities? This has been a British tradition of the past. As my experience on the voluntary side has shown me where we were not liable to income tax or SET the Government itself recently showed its approval of charitable activities by granting tax concessions in the Budget. So its intention to inflict VAT on them seems

somewhat illogical. This is how it looks to many charities and people of all political parties.
Our case in Oxfam is somewhat different from that of other charities in that we are the largest operator of charity gift shops and will have to pay 10 per cent. on all our sales.
Miss Halloran again gives the figure of about £150,000 throughout the whole country. I ask the Chancellor, if he is to wind up, whether the Treasury's calculation is that Oxfam will lose about £150,000? There has been a great deal of publicity, so the Treasury should have a figure.
To go back to the previous Amendment, on which I expected an answer—it was no fault of the Financial Secretary in the "hubble-dubble"—it would be useful if the suggestions made in these Amendments could be costed. We ought to have some idea of the costs we are talking about on each of these Amendments.
Miss Halloran goes on:
The people who donate clothes and goods to Oxfam do so in good faith knowing that the profits go to help the hungry overseas. What will they do now? Also, how will our workers feel when they have given of kind, time and energy to raise £1,000 in a shop but have only £900 to show on the return. I know as a voluntary worker how I shall feel"—
as she puts it—
working for three weeks without raising anything. I think that this psychological aspect is significant.
So again I directly ask the Chancellor: what attention has been paid to the psychological effect on charities?
I now come to two or three technical points. Oxfam says:
The main effect of VAT on charities will be to increase expenses and reduce income; administration will cost more"—
it comes back to the point made by the hon. and learned Member for Dover—
(more expensive equipment and much more paper work accounting), the provision of services will cost more (running homes, transport, maintenance, etc.)—and income from gifts will be less.
Two other general effects can be forecast, though we do not know how likely or serious they will be"—
again I ask for the Treasury's estimate—
there may be a reduction in the number of donors and volunteers; people at present willing to give their time and goods for free may be less keen to do so if they feel that one-tenth of their contribution (some three-quarters


of an hour a day for a volunteer shop worker) is going to the Government; in an attempt to avoid"—
it makes the point not to evade—
the tax, charities may find themselves splitting up various parts of their activities into separate groups so that no one group has a gross income of more than £5,000 a year. It is not yet clear how allowable this would be (the Customs and Excise has given conflicting replies to different charities); if it were allowable it would result in a pointless proliferation of charities with a consequent increase in administrative work.
Let us give credit where credit is due. They admit—and so do I—that the Government have made sizeable concessions to charities. These concessions, as they relate to estate duty, are put at £15 million a year, but they affect charities very unevenly. Those with a large legacy income tend to do best. The concessions are, however, reduced by losses arising out of the Budget. The net gain for Oxfam from the Budget will be £42,500, while the loss of income due to VAT will be £165,000. On the swings the gain is £42,500, and on the roundabouts the loss is £165,000.

Mr. Toby Jessel: How was this figure of £42,500 arrived at by OXFAM as being what it would gain from legacies as a result of the Budget? Surely it is ridiculous to attempt to put such a precise figure on it? As the Budget makes it possible for there to be a bequest of £50,000 without estate duty, it would need only one bequest a year to reach that figure.

Mr. Dalyell: Some charities receive estate duty bequests. I asked how the figure was arrived at, and I was told that it was the average of legacies received over the last five or 10 years. This is basically an estate duty figure. I took it on trust, and I think that it is a fairly reasonable figure.

Mr. Jessel: Is it not incorrect to analyse the last five years and project the result into the future? Does not that method fail to allow for the dynamic effect of any change resulting from the Budget which might cause more people to leave legacies to charities?

Mr. Dalyell: That is an imponderable. I see the Chancellor making a note. I hope that when he replies to the debate he will give the House an assessment of

the Treasury's view. I have given some figures. It is for the Treasury, with all its resources, to comment. If I am wrong, I shall listen, and if the case is convincing I shall be convinced, but this is what I have been given by serious people.
The psychological effect will be considerable. Human nature being what it is, if people think that a sizeable proportion of their time on charitable work is going to the State they may well be less willing to do it. This affects all those who have interests in charitable organisations. If my case is wrong, I hope to be convinced by the Treasury. It is up to the Treasury Bench to take these things serious and to let hon. Members know the Government's view.

Mrs. Peggy Fenner: I hope that the hon. Member for West Lothian (Mr. Dalyell) will forgive me if I do not follow the line of his argument, because I want to avoid the trap of dealing with the claims of charities about the money which they will lose if they remain within the VAT system and to confine myself to the Amendment which seeks to clear up the ambiguity about branches of parent bodies of national charities.
I hope that my right hon. and hon. Friends at the Treasury will look at this again. I made my only contribution in Committee on this very subject because I could see the tremendous difficulty in which charities would find themselves. I accept my right hon. Friend's assurances about the other provisions in the Budget being designed to ensure a substantial benefit for charitable bodies, and I accept, too, what my hon. Friend the Financial Secretary said in committee:
A very high percentage of the smaller charities are, by definition, unlikely to have a taxable turnover of over £5,000 a year and will therefore be exempt from VAT."—[Official Report, Standing Committee E. 8th June, 1972; c. 628.]
It is interesting to note that in this country there are 100,000 defined charities falling within the Income Tax Acts and accepted as such by the Charity Commissioners. That figure increases by 2,000 a year, and I am sure that my hon. Friend is right when he says that the majority of them will fall within the £5,000 a year turnover and will therefore be exempted.
A large proportion of the charitable work done in this country is carried out in our towns by branches of national charitable organisations. Special reference has been made to Oxfam. In my speech in Committee I referred to Dr. Barnardo's, a charity with which I am connected and which I know well. But all the charities affiliated to the National Council of Social Services, and those which are not, which operate on a national level both for work overseas and for social services in this country will be confronted with the same difficulty, namely, whether the annual incomes of branches will be aggregated with those of the national bodies and they will be required to keep records and be properly within the VAT system.
I know that it is my right hon. Friend's intention to help charities. I ask him to look again at the needs of branches of national charities and to try to do something about this ambiguity. I share the view expressed by the hon. Member for West Lothian that it will be an enormous deterrent to individual branches if they have to keep records of the sums involved when my right hon. Friend has shown that within a turnover of £5,000 a year it would be administrative nonsense to operate within the VAT system.
I ask my right hon. Friend to look at this provision again, especially because of the comments of my hon. and learned Friend the Member for Dover (Mr. Peter Rees) about companies which can disaggregate their total incomes. Let us not submit charities to the task of disaggregating all their branches merely for the sake of an administrative pattern. I know that in Committee I was not able to convince my hon. Friend, but I hope that since then my right hon. Friend has been able to give the matter careful consideration and that he will today put forward a proposal to get rid of this ambiguity.

5.0 p.m.

Mr. Frank Judd: The hon. Lady the Member for Rochester and Chatham (Mrs. Fenner) has spoken with a great deal of practical experience of the problems of charities in the front line. A characteristic of the whole issue with which we are concerned in this Amendment and in a number of others is the difference between those who, at one

stage or another in their lives, have been in the front line of charitable organisations and the theoreticians who, sitting in the objectivity, as they see it, of Whitehall, are able to look at how this could rationally and neatly be organised if only the volunteers and activists within the movement would see good sense.
I speak with a great deal of feeling on this point because for seven years before I became a Member of the House I was the secretary of a national charitable organisation. I am now the vice-chairman of the National Council of Social Service. I have seen the strength of feeling of countless charitable organisations pouring in in the form of anxious inquiries and protests to our headquarters in London. Obviously we shall have the main debate on this whole issue later, but I want now to take up a couple of points and to introduce another.
Hon. Members on both sides of the House have already referred to the psychological impact of this provision. We must try to bring ourselves down to the ground and think of the grass root problem. People who man charities in the front line locally are people with a passionate concern about a particular social problem. They want to be able to get on with the job of ministering to the need and to receive the funds necessary to do that with the minimum possible number of administrative and bureaucratic complications. Every piece of legislation introduced will either inhibit some of that voluntary spirit or else lead people over the years, unwittingly I suspect, into at least technical breaches of the regulations and the law. For that reason alone I hope that the Chancellor and his colleagues will be willing to look at this again and to reconsider the position.
The other point I want to make we shall hear more about in the main debate on charities later. We heave heard reference to the argument about swings and roundabouts. But this is such a sweeping generalisation of the reality in the world of charities that it is meaningless. A large number of charities, such as that for which I was working before becoming a Member of Parliament, will not benefit from the Budget concessions but will be liable for value added tax. We should look at their problems and the extra burdens being put upon them.
Dealing specifically with the issue of local branches and their liability, may I first make a point and then put a very specific question to the Chancellor. In the organisation of national charities there is very often a complicated relationship between the headquarters organisation and the branch, and all sorts of ad hoc arrangements may be worked out which enable the branch to retain a certain proportion of the funds it raises locally for local activities. It seems that this complication has not been thought through by the Treasury. How shall we decide how much of the money raised by a local operation, in the spirit of the operation, is intended for a completely localised piece of social work or charitable activity and how much is intended for the national organisation of that particular branch, although that branch may be legally an integrated part of the national organisation?

Dr. Alan Glyn: This would apply equally well to a branch which was told to raise certain funds and that anything received above those funds was to be given to the main association; or vice versa, if the main charity used some of the funds raised by the branch.

Mr. Judd: The hon. Gentleman is serving to illustrate the complexity of the possible relationships, and I am grateful to him. My point was about the way in which funds may be applied to the work itself. My specific question to the Chancellor is this. We all know that although the Government are committed to value added tax as a major taxation in its own right, a great deal of the impetus for this must relate to our possibly entry to the EEC. Have the Chancellor and his colleagues undertaken any specific research into how this works out in some of the member countries of the EEC? There have been reports—it would be interesting to see the results of a Treasury investigation into this—that in a number of member States of the EEC where VAT exists there is exemption for branches of the kind we are discussing. If the Government are so hell bent on harmonising our system of taxation and social administration with that of the Six, they might do their homework better and ensure that the system they wish to operate is similar to the system operating in the Six.

The Chancellor of the Exchequer (Mr. Anthony Barber): It would probably be convenient for the House if I were to intervene in the debate now.
I say immediately to the hon. Member for Portsmouth, West (Mr. Judd) that I have made it crystal clear in the past that the decision to introduce value added tax in this country was taken quite independently of our application to join the European Economic Community.

Mr. Arthur Lewis: But the right hon. Gentleman will still introduce it.

Mr. Barber: I am sure that the hon. Member for West Ham, North (Mr. Arthur Lewis) will accept that from me as being the case. After all, I was the person who took the decision.
The object of the Amendments is to provide that in determining whether a charity or, indeed, a political party has a taxable turnover above £5,000 a year and so would be liable to registration, the taxable turnover of any branches and the parent body should not be aggregated but should be considered separately.
For two reasons, which I shall come to shortly, I hope and expect that the hon. Member for Heywood and Royton (Mr. Joel Barnett) will seek the leave of the House to withdraw the Amendment.
First, the position under the Bill as at present drafted is that any branch of a charity which is a separate legal entity—for example, a separately incorporated business or a local voluntary committee of well wishers acting under the general approval of the central body but with no formal responsibility to it—could be considered separately for registration and registered or exempted according to its turnover. As separate legal persons they would be considered separately in the first instance. I need not go over this aspect again because it was dealt with in Committee by my hon. Friend the Financial Secretary.
There has been some reference to other changes in the Budget. The Amendment is fairly narrow in scope although, from what has been said, it is obviously considered to be of great importance. It is not fair for the hon. Member for Portsmouth, West, who is a very fair man about these matters, to suggest that every


change in legislation appears to be disadvantageous to charities. The simple fact is that the changes I made in the Budget concerning capital gains tax and bequests were of great importance. They were certainly fairly costly to the Exchequer. I decided to do this—which is more than previous Governments have done—because I believed that this was one of the best ways of helping charities. Although this is not the occasion to go over this particular aspect again, I say in passing that I agree entirely with the intervention of my hon. Friend the Member for Twickenham (Mr. Jessel), who put the matter very fairly when he spoke about what this would mean to charities. One cannot just look back over the past. Obviously it is bound to have an effect on people's intentions in the future.

Mr. Dalyell: Is not part of the difficulty here that the blanket definition of charities can be very misleading? We know that there are some charities—for instance, the National Trust—which by their nature attract legacies. Other charities, equally by their nature, do not attract legacies.

Mr. Barber: This is one of the great problems in this whole area. I am pleased that the hon. Gentleman recognises it. There are about 100,000 charities and they vary greatly. I prefer the view taken by my hon. Friend the Member for Twickenham to that of the hon. Gentleman, namely, that in the future the action we have taken on estate duty will have a marked effect. I hope that those charities which, perhaps, have not done very well in bequests in the past will set their stall out now to try to do better.
The Amendment is recognised on all sides as of very considerable importance. Apart from the Amendment, I have had a number of representations, not only from my hon. and learned Friend the Member for Dover (Mr.Peter Rees) and my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner), but also from other of my hon. Friends who have personal experience of charities which would be affected by the matter we are discussing.
I can see immediately what is behind the Amendments. They are concerned with the case of a local charity or political association which may well be linked,

affiliated or connected in some way to a national charity or to a national political party, but which in substance would appear to those who work for it to be a local committee of voluntary workers with no formal responsibility to the central body, although it may well have identical objectives. It presents a very real problem. I am thinking of the genuine local fetes, jumble sales, sales of work and charity shops which have become more and more important in recent years, and other types of money-raising activities where the turnover is less than £5,000 a year. I am thinking of those places where there is no significant unfair competition with the local commercial trader.
There are difficulties and I cannot advise the House to accept the Amendments because they are defective in their drafting. If anyone wants to know why I will explain, but I hope that the House will take it from me that they are defective. However, I should like to see whether it is possible to meet the obvious intention behind the Amendments by treating branches of charities and political associations as separate entities for the purposes of VAT even if they are not formally separate from the parent body. If necessary Amendment to the law could be made in the Finance Bill next year.
Meanwhile, any charities which are faced with the problem I have described—some spring obviously to mind but there may be others which have not got round to making representations on the point—should get in touch with the Customs and Excise to discuss the situation before the date on which they would normally be due to register. The Customs will be giving further guidance about this before registration begins. For reasons which I know the House will fully understand I cannot commit myself at this stage but with the clear promise that I have given I hope the hon. Member will see fit to withdraw the Amendment.

Mr. Dalyell: Some of us who put the case would like to thank the Chancellor very much for this reasonable answer. Does it mean, for example, that Oxfam in Scotland can in a sense be treated as an entity different from Oxfam as a whole.

Mr. Barber: It means that any branch, or what is normally thought of as a branch, even though it may be formally


—by which I mean in law—otherwise, and for the purposes of VAT not separate from its parent charity, should be treated in substance for the purposes of VAT as if it is a separate entity. That was what I understood to be the purpose of the Amendment. I think that is right and it is certainly the point put to me. What is proposed will be of wide assistance.
The next thing is for the Customs to go into the matter with the charities which are particularly concerned about this aspect and then my hon. Friend the Financial Secretary and I can deal with it personally and hope that if all goes well we shall be able to bring forward a provision to deal with the matter in the next Finance Bill.

5.15 p.m.

Mr. Joel Barnett: With the leave of the House I wish to say without any further ado that I am most grateful to the Chancellor, as I am sure all hon. Members are. He has entirely met the point that I made and that I know had the support of Members on both sides, and I accept his undertaking in the way it has been given. In the circumstances I have no——

Mr. Arthur Lewis: On a point of order. Some hon. Members have been sitting here trying to catch your eye, Miss Harvie Anderson. There are other points to be made beside those made by the pro-Marketeers. A point was made by my hon. Friend the Member for Portsmouth, West (Mr. Judd), concerning the Common Market and before my hon. Friend withdraws the Amendment there are points I should like to make.

Mr. Barnett: I do not know if one's attitude over the Common Market is related to the matter——

Mr. Lewis: Give me a chance to speak.

Mr. Barnett: I entirely take my hon. Friend's point. If he wishes to make an anti-Market speech I have no objection, but I hope he will not mind if I make a speech accepting what the Chancellor has said as meeting entirely the point I have been making. I do so regardless of my feelings on the Common Market. I will delay further the words I intended to use, always providing my hon. Friend catches your eye, Miss Harvie Anderson.

Several Hon. Members: Several Hon. Members rose——

Mr. Deputy Speaker (Miss Harvie Anderson): There is no need to get unduly exercised about the point of order which has been raised. The hon. Member for West Ham, North (Mr. Arthur Lewis) is in order to raise the point of order and the hon. Member for Heywood and Royton (Mr. Joel Barnett) is equally right in delaying the point he intended to make. I think it is the wish of the House for me to call Mr. Arthur Lewis.

Mr. Arthur Lewis: I was compelled to raise my point of order, because the rules of the House would have meant that if my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) had sought the leave of the House to withdraw his Amendment I would have to oppose him in order to be able to speak. I did not wish to do that. I do not want to make either a pro-or anti-Market speech.
My hon. Friend the Member for Portsmouth, West touched briefly upon the point which I do not think the Chancellor dealt with and therefore I wish to raise it. I have had, as I expect most hon. Members have, a number of circulars from a number of charities about VAT. I have had one in particular from the Committee for Assistance to the Aged. Of some 50 sponsors, 30 are pro-Marketeer Members of either the House of Commons or the House of Lords. The Chancellor said that whether or not we went into the Common Market he had intended to introduce VAT. We accept that. But we all know that if we join the Common Market we will have no choice but to introduce VAT.
My hon. Friend the Member for Portsmouth, West explained that in the Common Market some countries impose VAT on charities and some do not. The Chancellor should have done his homework and given us information about that. He has said quite rightly that the Government have helped charities with concessions on bequests and capital gains tax which will mean a considerable saving for some of them. We accept this and we pay tribute to what the Government have done because other Governments have failed to do it. But the smaller charities, those which are not so well known, do not often get large bequests and for them there will be no saving. Equally, those that operate on


a shoe-string budget will not derive much benefit from the capital gains concession.
The Chancellor has promised to take action in the next Finance Bill. But if we go into the Common Market many things will happen which will preclude the House from having the right to alter or amend any decisions reached in Brussels.
This is not hypothesis. Let us assume that we join the Common Market in January, and the Commissioners say that VAT on charities shall apply in all countries within the enlarged EEC. Let us assume that the Chancellor is outvoted, despite all his powers of persuasion, by nine votes to one. I do not think the veto can apply, and therefore he can do nothing about it. When he reports to the House we shall have no right to amend what is proposed. The Whips will be on, and it will be accepted. That means that the Chancellor, honest as he may be, will be unable to do anything about it in his next Budget. He will tell the House, "I am sorry. You have agreed under the European Communities Act that we shall be bound by the decisions of the Council of Ministers. The Council of Ministers has come to this decision, although we in Britain opposed it, and we must unfortunately give way on this issue", as the Government have given way on a number of other issues and will give way on issues even now being discussed. He will say, "Although I gave my promise in all good faith, I cannot do anything about it".

Mr. Kenneth Lomas: It does not matter whether we are pro-Market or anti-Market. I am in favour of joining Europe, and have made my position quite clear. I think we shall go in. Whatever our views, the Chancellor has the opportunity to decide what taxes shall be applied to charities or any other bodies. The real point has nothing to do with being in or out of the Market. We should try to find out from the Chancellor why he intends to impose a tax on charities at all.

Mr. Lewis: My hon. Friend came in just at the conclusion of the speech of my hon. Friend the Member for Portsmouth, West. The question does have something to do with whether we join

the Market. It is true that at present the Chancellor can impose VAT on charities if he wishes, or take it off, which he is not going to do. At present he can say that he will take it off in next year's Budget. What he cannot do is to say what may happen between now and next year if we go into the Common Market and the countries with VAT on charities say, "We want to harmonise the tax and make it generally applicable, as we have done on wines, spirits and a hundred and one other things." It is true that this country would probably oppose that, but we should be the odd one out. We should be bound by the majority vote. The veto applies only if it can be proved that the decision is diametrically opposed to the national interest of a country. We cannot argue for contracting out of a general value-added tax on all charities in all the countries of the Ten, as we could with whisky. We could say that it should not apply to whisky, because we should be the only country in the Ten affected. Therefore, we should have to give way, as on a number of other issues already on the 2,000-odd regulations, which we have had to agree to in toto, with no chance of reading them, amending them or doing anything about them. The Chancellor knows this to be the case.
If the Chancellor can give me a guarantee that, come what may, if the Common Market countries agree to a harmonisation of whatever tax it might be on charities, we shall not have to implement it if we do not want to, I will accept that. But I have doubts about the pledge the right hon. Gentleman is now giving, because the Common Market countries may well override him when the time comes.

Dr. Glyn: My right hon. Friend the Chancellor has made a great concession. But I should like him to spell out very carefully the position of organisations like St. John and the Red Cross and Oxfam, where every individual branch is part and parcel of the same organisation. As I see it, if they register in the spring there will be a period of about six months when they will be liable before the next Finance Act. It would be helpful if the major organisations like those I have mentioned knew their exact position between now and the next Finance Act. Branches cannot possibly be separated from the main


organisations by virtue of the organisations' charters and the whole of their structure.

Mr. Barber: I hope that organisations such as those which my hon. Friend has mentioned will take advantage of the suggestion I made of forthwith getting in touch with the Customs and Excise.

Captain Walter Elliot: If my right hon. Friend can nod his head, indicating a favourable answer to my question, I shall sit down at once. Did his favourable reply to the debate include the political parties?

Mr. Barber: Mr. Barber indicated assent.

Mr. David Mitchell: I am most grateful for the assurance my right hon. Friend the Chancellor has given.
Like many other hon. Members, no doubt, I have had a large deputation of various charities come to see me. My right hon. Friend has gone at least part of the way to meet the problems they raised. However, there are three other points.
First, I understand very clearly the difficulties which face the Government in giving a blanket exemption to charities. Some are perhaps rather diverse in their activities and might not commend themselves wholly to my right hon. Friend. If he can say a little more today about the treatment it is intended to give to second-hand goods, that will be helpful. I realise that there is a power to make regulations, but if we could know a little more about what it is intended to do in those regulations, and could have assurances, it would go a long way to solving the problem of the sort of charities which receive second-hand items, which have already borne tax when purchased and which would bear double tax if they were sold in a charity shop or charity bazaar.
Secondly, there is the question of the book work involved in issuing invoices in a charity shop. A limit of £20 instead of £10 for a simple invoice not having to show VAT worked out as a separate item would go a long way to solving this problem. There are few items sold worth over £20 in these shops, but there are a number worth between £10 and £20. Dealing with the £5,000 put, a lot of these shops

are just under that figure now and on the basis of the assurance the Chancellor has given they will be happy. But in four years' time £5,000 will be rather different. Can we have an assurance that the £5,000 can be altered without fresh legislation?

Mr. Barnett: I content myself by asking leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5

SUPPLY OF GOODS AND SERVICES

5.30 p.m.

Mr. Sheldon: I beg to move Amendment No. 14, in page 4, line 37, leave out from "treated" to "as" in line 38.

Mr. Deputy Speaker (Miss Harvie Anderson): With this we can also discuss Government Amendment No. 15.

Mr. Sheldon: Looking at the history of this matter it is surprising that we have spent so much time on what is such a small point. The reason for the Amendment springs from debates in Committee when we tabled a proving Amendment to test what the Government had in mind. The result was surprising. It was fairly clear to us that the purport of the Clause was not obvious to those responsible and we found a good deal of complication and contradition which we tried to resolve in Committee. In the last resort we found that there was a lack of clarity in the drafting, and the Financial Secretary said that he would go away and try to clear it up. With that assurance we left the matter.
There are certain elements that are still not clear. What happens under the Clause is that a person who puts a process on particular goods is defined as producing goods rather than supplying services. It is still worth while giving the example I gave in Committee of the vitreous enameller whereby a vitreous enameller will receive certain parts from a gas stove manufacturer to be enamelled and returned for assembly. There are other, similar, kinds of operation. Such a person is obviously a supplier of services. Clause 5(3) says:
Where a person produces goods by applying to another person's goods a treatment or


process he is treated as supplying the goods so produced and not as supplying services.
My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) took up the question of the bespoke tailor and asked whether such a tailor making up a garment from cloth supplied by the customer would be charged VAT on the making or on the whole garment.
It is astonishing that at this stage it is still unclear. The issue is simple. If the supplier supplies goods he is charged on the value added tax of those goods; if he supplies a process then he should be charged VAT on the process. Under subsection (3) if he supplies a process to a person's goods he is considered as supplying the goods and, as we understand it, that means that VAT is charged on the whole of the goods. If a person is supplying the process he should be charged on the process. Will the hon. Gentleman finally clarify this? If he is in some doubt as to what our intentions are may I quote to him from the Committee proceedings of 24th May in which he said, speaking of the Bill:
It says that, where a person applies to another person's goods a treatment or process, he shall be regarded as supplying the goods so produced and not supplying services.
In reply to my hon. Friend the Member for Heywood and Royton he said:
In the case of processing, if it is in fact a process, the consideration will be the processing charge and that is the value on which the tax will be chargeable."—[Official Report, Standing Committee E, 24th May, 1972; c. 208–20.]
To me these are still contradictory. My hon. Friend and I have failed to resolve what should be a simple matter. It is clear that the firm which treats the goods supplied for processing will have value added tax charged on the process. Do I carry the hon. Gentleman with me?

Mr. Higgins: Mr. Higgins indicated assent.

Mr. Sheldon: I fail to understand why the simple language that he used did not find its way into Clause 5. It is simple language which is legally quite clear and permits of no other explanation. Although the Clause has been changed it has not been changed materially, because according to the Clause tax will be charged on the goods not the process.

Mr. Higgins: Hon. Gentlemen opposite will realise that there has been a con-

siderable amount of confusion about the matter covered by their Amendment and also by Amendment No. 15 which seek to clarify the drafting of the subsection. When we discussed it in Committee there were a number of extraneous reasons why the proceedings were not as clear as they might have been.
We are naturally anxious that the drafting of the Bill should achieve our objective, and I am assured that if the House accepts Government Amendment No. 15 the position will be satisfactory. I cannot recommend the House to accept Amendment No. 14. I will try to explain why, although I am in a slight difficulty in that as we are on Report and not in Committee I have to try to persuade the hon. Gentleman in one fell swoop rather than in a series of interventions. The matter is not simple, but I will try to explain it as well as I can.
The effect of Amendment No. 14 would be to classify all processes and treatments applied by one person to another person's goods as supplies of services for VAT purposes and not as supplies of goods. There are two snags to this. The first objection is that it would be contrary to the EEC Second Directive—and I can say that as the hon. Member for West Ham, North (Mr. Arthur Lewis) has left. That is not the overwhelming consideration. It would also in some cases be contrary to common sense.
Let me give an example of the effect of Amendment No. 14. It would be absurd that the processes of sawing up logs into planks, cutting the planks into lengths and nailing them together to make boxes should not be regarded as constituting the production of boxes merely because the boxes were being supplied to the original owner of the logs.
As I say, there are objections to the Amendment, and I hope that I shall manage to persuade the hon. Gentleman that there is something to be said in favour of Amendment No. 15 and that the whole Clause will be satisfactory if our Amendment is accepted.
The Opposition's desire is, effectively, to see all processes classified as services. That no doubt reflects the continuing suspicion that classifying them as the production of goods will mean that the goods bear extra tax. I think that is what is at the back of the hon. Gentleman's argument.
That is not the position. The value of a supply of goods for VAT purposes is the consideration that changes hands for the transaction concerned, less the tax. When a processor sends goods back to the owner and makes a processing charge, the tax will be levied on the processing charge and not on the full value of the goods. That is equally true whether the process falls within Clause 5(3) and is regarded as the production of goods or whether it is a less radical process and classified as a service. I appreciate that hon. Gentlemen opposite are concerned that that is not the case. I am assured, and I believe, that the position is not as they fear.

Mr. Sheldon: I understand the explanation which the hon. Gentleman has given. It obviously accords with common sense and is what one would expect to see in the Bill, but where is to be found in the Bill?

Mr. Higgins: If I may continue, I would prefer to give an explanation at some length, if the hon. Gentleman will be patient, because it is important to get it right
The contention, which appears in the proceedings of the third Sitting of the Committee on 24th May in columns 192 to 222, appears to be that the subsection as drafted would cause tax to be chargeable on the transactions described in the debate on the basis of full value, that is to say selling value, of the goods produced. In fact, the subsection—and it will be clearer if we accept Government Amendment No. 15—has no such effect. Its only effect is to attach to a particular kind of transaction the label "supply of goods" instead of the label "supply of services". As I pointed out repeatedly in Committee, the labelling follows the EEC directive, and the nature of the label is important in some respects, but not on the aspect about which the hon. Gentleman is worried.
5.45 p.m.
The incidence of the tax is in some cases affected according to whether the label is the "supply of goods" or the "supply of services". The most important way in which the incidence of the tax may be affected is in connection with the tax point, that is the time at which the tax is considered to arise on the

transaction. There is a slight complication here, in that there are Government Amendments to Clause 7 which will make alterations to the actual tax, but I suggest it would not be advisable to pursue that at this stage.
Whether it is the supply of goods or the supply of services makes a difference to the treatment as far as the tax point is concerned. Therefore, the Clause seeks to define whether a particular transaction is a supply of goods or a supply of services. It will be appreciated that the precise tax point makes a difference. For example, if there is a change in the rate it can make a difference, and it can also make a difference towards the end of the trader's accounting period.
I think it was appreciated in Committee that whether it was treated as a supply of goods or a supply of services made a difference. As I emphasised repeatedly, that is the purpose of the rather complicated words which we are discussing. Indeed, in exceptional circumstances the distinction between goods and services can make a difference to the tax liability of the supply, that is to say, if it is zero-rated, and so on. There are other complications, whether the supply is gratuitous, and so on. I do not think the House will wish to go into those points, which we discussed at considerable length in Committee.
It was thought by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) in Committee, and it is still thought by him, that a supply of goods must always mean a supply at the full value, that is to say the selling value, of the goods. That is not so. The value of a supply of goods for VAT purposes, the value at which the tax is charged, is normally the consideration that changes hands on a particular transaction less the tax itself. When a processor sends goods back to the owner after completing the processing and makes a charge for the job, the consideration for the transaction is that charge, not the full value of the goods; and the tax will apply accordingly. That is equally true whether the process constitutes the production of goods or whether it is a less radical process classified as a service.
The subsection refers to processes and treatments which result in "producing goods", that is to say, goods which are different in character from the material


which existed before the process of treatment was carried out; say a suit or dress made from a length of cloth. Less radical processes, such as cleaning, dyeing, repairing or the vitreous enamelling mentioned by the hon. Member for Ashton-under-Lyne, are not within the subsection and are supplies of services. In their case also the tax is based on the charge for the job.

Mr. Sheldon: When the processor returns those goods on which the process has been carried out, does he charge VAT on the total cost of those goods, being allowed the input tax on the goods coming to him before processing is effected, or does he charge VAT on the cost of processing alone?

Mr. Higgins: I thought I had clarified the position. Part of the problem may arise on the definition of "value" in Clause 10 (2). I have sought to spell out the position as clearly as I can. I have tried to explain that the hon. Gentleman's fears are unfounded if he believes that in some way this provision causes tax to be charged on the transactions which it describes on the basis of the full value, that is the sale value of the goods. That is not the case. It does not have that effect. Its only effect is to attach a label as to whether it is a transaction in goods or in services, but the consideration will be the amount paid for the process.
We have studied carefully all the comments made in Committee, and particularly the remarks of the hon. Member for Ashton-under-Lyne. We came to the conclusion that he was on a false point. However, we thought the position could be tidied up and have now tabled Amendment No. 15 which we thought would make the position clearer. Amendment No. 15 seeks to delete the words "the goods so produced" and to substitute "goods". We are content that the provision will achieve the objectives which I have stated and which were originally intended by the draftsmen. Much of the confusion in Committee arose because of the use of the expression in the Bill "the goods so produced".
This point was raised in Committee by the hon. Member for Islington, South-West (Mr. George Cunningham) and I was impressed by his arguments. He

drew attention to the fact that we were talking about the goods so produced as against merely the goods. This is reflected in Amendment No. 15 and I am convinced that the drafting is now tidied up by the change which we now propose.
I feel that the fears of the hon. Member for Ashton-under-Lyne are not valid and that the disadvantages he seeks in this respect will not come to pass. I advise the House not to accept Amendment No.14, which has at least two objections to it, but to accept the Government Amendment No. 15 which makes the intention clearer than was previously the case.

Mr. Dalyell: Woe betide the Financial Secretary if the hon. Member for West Ham, North (Mr. Arthur Lewis) reads his words in Hansard tomorow. The truth is that we are in a hubble-dubble about this matter. The phrase "hubble-dubble" exactly describes our state of mind. I should like to quote what the Financial Secretary said in Committee and I recall that he was a little petulant when he said this:
I gladly do so again because I recognise that the hon. Gentleman has a genuine doubt. I have sought to clarify it for him, and I repeat, for the third time, that the intention is to collect VAT from processors by making them accountable for tax on what they charge for work under contract. When the hon. Gentleman asked if the tax was to be on the full value of the goods, I replied that the normal workings of the credit mechanism would operate and that the value of the supply—that is, the processor's charge for the job—would be the consideration."—[Official Report, Standing Committee E, 24th May, 1972; c. 218.]
From what he said this afternoon, I did not gather that the value of the supply was to be the consideration.
I also wish to pursue the tax point. What precisely does the Treasury mean by the phrase "not the full sale"? I hope that the Financial Secretary will ask for the leave of the House in order to reply on this matter which is a point of some consequence.

Mr. George Cunningham: I am grateful to the Financial Secretary for tabling Amendment No.15, which I think meets the point I raised in Committee. I am not saying that there are not other difficulties which I foresee, but certainly the difficulties I saw in Committee are met by the Government


Amendment. It may not have given rise to any difficulty, but as the provision was drafted there could have been doubt about the ambiguity of language. This would have been particularly regrettable for a number of processors in my constituency.

Mr. Sheldon: May I, with the leave of the House, say that what we are discussing is a subsection which has to do with the merchant converter. He is a person who obtains articles manufactured by other people and sends them out to a third person for subsequent processing for sale by himself. The subsection covers that situation quite well. Where the provision falls down is in the way in which it covers the problems of the processor himself.
The Financial Secretary repeatedly said that the processor himself, let us say somebody who is chromium plating a piece of metal, will pay VAT only on the cost of that process. That is understood but one can charge VAT on that process in two different ways. One can say that VAT will be charged on the process alone. One finds what is the cost of the process, the invoice price, and charges VAT on that process, or one can say that that firm will receive the article to be processed and that article will cost, say £1. When the article is sent back it will contain 50p worth of processing and will be sold back for £1·50. The VAT could then be on the sum of £1·50 less the input tax of £1.
We have failed to get any explanation from the Financial Secretary as to which method will be used. Subsection (3) says that the person who processes goods will be treated as supplying the goods. It was suggested that the way in which the accounts were to be made up relates to the second example which I gave.

Mr. Higgins: Perhaps, with the leave of the House, I may seek to clarify the position. I have sought to set out the purpose of the provision, namely to attach a label on whether something is a supply of goods or a supply of services, since this makes a difference in terms of tax. To take the example put forward by the hon. Gentleman, when the materials are handed over to the processor by the owner, there is no charge, no tax, no input tax deduction. He charges tax on that process which is the consideration for that supply. That is what

the position normally will be. I am still puzzled why the hon. Gentleman should have problems over this matter.

Mr. Sheldon: If that is the simple explanation, it is a pity it is not in subsection (3). Why do we have to have all these other words? Nothing the hon. Gentleman said about the real significance of the provision is contained in subsection (3). It is a trivial matter to raise, but repeated discussion and comment has failed to produce an explanation in legislative form in the Bill. The reason may be—thismay certainly be the view of my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis)—that this provision has not translated very well from French. Whatever the reason, it is a pity that we have wasted so much time on such a simple matter. Why, if that is so, did not the hon. Gentleman go back and put it in?
We do not want to waste any more time on this matter. It is a great pity that the Clause is still badly drafted. It is obviously drafted in this way to meet some international requirements rather than the British requirements of understanding what the legal position is and should be. However, in view of the discussions which we have had I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 15, in page 4, line 38, leave out 'the goods so produced' and insert 'goods'.—[Mr. Higgins.]

Clause 6

SELF-SUPPLY

6.0 p.m.

Mr. Higgins: I beg to move Amendment No. 16, in page 5, line 24, leave out from 'securing' to 'are' in line 26 and insert:
'subject to any exceptions provided for by or under the order, that, where in such circumstances as may be specified in the order goods of a description so specified'.
I understand that we can take with it Amendment 17, in line 34, at beginning insert 'the goods'.
There was nothing sinister in the drafting of the international sort which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) suggested. Often what


can be explained fairly simply in common sense wording is not adequate for legal purposes. The problem in drafting Bills is that one does so in a legal form rather than in a common sense form. It is a matter for lawyers. However, this is not the first occasion on which the House has been confronted with that problem. The conclusion normally reached is that drafting should be done in the form which the parliamentary draftsmen and lawyers find acceptable rather than the form which those concerned with common sense find acceptable. Whether that is invariably the case is another matter.
Amendment 16 is a technical Amendment to enable the scope of self-supplying Orders in respect of goods to be allocated by reference to the circumstances in which the self-supply is made. Amendment 17 is a purely consequential drafting Amendment. If the Amendments are not accepted, the scope of self-supply Orders for goods could be restricted only by reference to the description of the goods.
The purpose of Clause 6 is to enable the Treasury to treat as "supplied" for VAT purposes, specified goods or services which a person supplies to himself for use in his business. Such self-supplies are then specially taxable. Office stationery purchased for self-supply is an example, but there are others. The need for an order on office stationery has been foreseen in the White Paper. If we do not have the power there is a risk of distortion of competition because of the introduction of the tax. The purpose of the self-supply order, by specially taxing those self-supplies as though they had been purchased from another person, is to restore neutrality of competition. This is something which is familiar to those who dealt with the matter upstairs.
The point the Amendment seeks to make is that it is necessary to limit the scope of self-supply orders—in the case of business stationery to exempt and partly-exempt persons. There are other classes where similar considerations may apply. As drafted, however, Clause 6 enables exceptions to an order to be made by reference to a description of goods but not by reference to a description of person or the circumstances in which the self-supply is made.
If the House did not accept the Amendment, the self-supply order in respect of for example stationery would have to apply not only to exempt and partly-exempt persons but also to wholly taxable persons. Since wholly taxable persons can offset all their input tax on stationery they buy in, they can obtain no tax advantage by making self-supplies. The result would be to impose an administrative burden on wholly taxable persons to no purpose. The vires therefore needs to be extended to enable exceptions to self-supply orders to be made by reference to the circumstances of the self-supply.
That is the purpose of the Amendment. Although it is a technical Amendment, I hope that it will not arouse the degree of controversy which the previous Amendment aroused and that the House will see fit to accept it.

Mr. Dalyell: Is this worth the administrative burden? Does not this provision involve a considerable administrative burden?

Mr. Higgins: We believe that this is an important power. We are anxious that there should not be a distortion of competition as a result of the tax. No doubt the power will be used sparingly. Indeed, another case has come to our attention which we think may be a possible use of the power. Certainly we think that this provision is justified and that it will be useful.

Amendment agreed to.

Amendment made: No. 17, in page 5, line 34 at beginning insert 'the goods'.—[Mr. Higgins.]

Clause 7

TIME OF SUPPLY

Mr. Higgins: I beg to move Amendment No. 18, in page 6, line 15, leave out from second 'the' to end of line 20 and insert 'time of the removal'.
I understand that we can also take with it the following Government Amendments: No. 19, in line 23, at end insert:
'(c) if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes


certain that the supply has taken place, but not later than twelve months after the removal'.
No. 20, in page 6, leave out lines 24 to 30.
No. 21, in line 30, at end insert:
'(3) Subject to the following provisions of this section, a supply of services shall be treated as taking place at the time when the services are performed.
(4) If, before the time applicable under sub section (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it or if, before the time applicable under paragraph (a) or (b) of subsection (2) or subsection (3) of this section he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.
(5) If, within fourteen days after the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (notwithstanding the preceding provisions of this section) be treated as taking place at the time the invoice is issued.
(6) The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction'.
No. 22, in line 35, leave out from beginning to end of line 15 on page 7 and insert:
'(8) The Commissioners may by regulation make provision with respect to the time at which, notwithstanding the preceding provisions of this section, a supply is to be treated as taking place in cases where goods or services are supplied for a consideration the whole or part of which is determined or payable periodically or at the end of any period or where goods are supplied for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose; and any such regulations may provide—
(a) for treating goods supplied on hire for any period as being successively supplied on hire for successive parts of that period; and
(b) for treating services supplied for any period as being successively supplied for successive parts of that period.
(9) In this section "tax invoice" means such an invoice as is required under section 30(2) of this Act or would be so required if the person to whom the supply is made were a taxable person'.
These important Amendments arise from questions about the tax point raised

in Standing Committee on 25th May by my hon. Friend the Member for Dartford (Mr. Trew). The Amendments relate to the time at which goods and services are to be treated as being supplied for VAT purposes; that is to say, the tax point. They fulfil a promise made by the Government in Committee to review the tax point provision of Clause 7 before Report.
Their detailed effects are, first, to retain the basic tax point—that is to say, the date of removal from the supplier's premises and the tax point for services, the date of performance; secondly, to abolish the "three months rule" for the removal of goods; thirdly, to introduce a payments tax point for goods as well as services, in addition to a tax invoice tax point, if either of these events precedes the basic tax points; fourthly, to introduce a new rule, under which if a tax invoice is issued within 14 days after the tax point, the date of issue of the tax invoice becomes the tax point. That is the most important Amendment which we are making.
The fifth point is to allow the Commissioners to extend the 14-days time limit in cases where a taxable person can show that it is impracticable to issue tax invoices regularly within 14 days. The final provision is to introduce tax points for goods sent or taken on sale or return approval or similar terms.
I have gone through that rather quickly but, as I say, the important provision is the fourth one which will introduce a new rule under which if a tax invoice is issued within 14 days after the basic tax point, the date of issue of the tax invoice becomes the tax point. That was one of the points which was raised in Committee. We have sought to meet the points which were raised in Committee because we regard them as important. We have also received trade representations.
The important provision which I mentioned a short while ago means that in practice the issue of a tax invoice will become the normal tax point for money transactions.

Mr. Joel Barnett: Mr. Joel Barnett indicated assent.

Mr. Higgins: I am glad to see the hon. Member for Heywood and Royton (Mr. Joel Barnett) nodding in assent.
The Amendments tend to make verification of taxable supplies more difficult and there may be some delay in collection. This minor disadvantage should be weighed against the fact that the Amendments overcome the practical difficulties foreseen by industry and commerce operating the previous proposals and achieve a worthwhile simplification.
Having considered this stage which was reached in Committee, we came to the conclusion that it was right to make these Amendments. They are rather complicated, but we went over the arguments in considerable depth upstairs and I do not imagine that the House would wish me now to go over the arguments for the Amendments but rather to explain exactly what they do.
The Amendments allow the invoice date to override the removal or performance date automatically if a tax invoice is issued within 14 days after the removal of performance date. Taxable persons will be allowed not to avail themselves of this provision—that is to say, to adhere to the removal or performance date if they prefer. They will also be allowed to apply to Customs and Excise for the approval of a longer period than 14 days if necessary. The need for this extension will arise in industries where it is necessary, for example, to await the receipt of invoices from suppliers and to negotiate prices for deliveries before the amount due can be invoiced to customers.
It is to be expected, however, that elections to adhere to the basic tax points and applications for extensions will be much fewer than the elections that would have resulted from the Amendments proposed in Committee and that this will thus avoid creating considerable extra case work because the 14-day provision will suit the majority of traders.
Following our discussions upstairs and the reasons I have now given, I hope that the House will feel it right to accept the Amendments.

Mr. Joel Barnett: This proves the usefulness of debates in Committee. The Amendment is a useful concession. As the hon. Gentleman rightly said, it represents an important change—indeed, it could prove to be very important if, as we suspect, there is in the not-too-distant

future a change of rate upwards. Clearly, the invoice date becomes even more important when there is a change of rate. Be that as it may, I do not want to be over mischievous at this time. We shall have our opportunities later in the day. I am grateful to the hon. Gentleman for having looked into and accepted the various points we made in Committee.

Mr. Dalyell: As one of those who, in Committee, at some length put forward a case on behalf of the Scottish chartered accountants, I thank the Treasury for meeting the points made. However, I do not quite follow the final paragraph of Amendment No. 21, which reads:
The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction.
Precisely to which direction are we referring to here?

Mr. Peter Trew: As my hon. Friend the Financial Secretary was kind enough to refer to me, I should like to say that the Amendments meet substantially all the points I made in Standing Committee and that I am most grateful to him.

Mr. Higgins: If the hon. Member for West Lothian (Mr. Dalyell) agrees, I will write to him about the point he raised.

Mr. Dalyell: Yes.

Mr. Higgins: This is a rather technical aspect and I will therefore seek to clarify it in writing.

Amendment agreed to.

Amendments made: No. 19, in page 6, line 23, at end insert:
'(c) if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes certain that the supply has taken place, but not later than twelve months after the removal'.

No. 20, in page 6, leave out lines 24 to 30.

No. 21, in line 30 at end insert:
'(3) Subject to the following provisions of this section, a supply of services shall be treated as taking place at the time when the services are performed.


(4) If, before the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it or if, before the time applicable under paragraph (a) or (b) of subsection (2) or subsection (3) of this section he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.
(5) If, within fourteen days after the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (notwithstanding the preceding provisions of this section) be treated as taking place at the time the invoice is issued.
(6) The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction'.

No. 22, in line 35 leave out from beginning to end of line 15 on page 7 and insert:
'(8) The Commissioners may by regulation make provision with respect to the time at which, notwithstanding the preceding provisions of this section, a supply is to be treated as taking place in cases where goods or services are supplied for a consideration the whole or part of which is determined or payable periodically or at the end of any period or where goods are supplied for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose; and any such regulations may provide—
(a) for treating goods supplied on hire for any period as being successively supplied on hire for successive parts of that period; and
(b) for treating services Supplied for any period as being successively supplied for successive parts of that period.
(9) In this section "tax invoice" means such an invoice as is required under section 30(2) of this Act or would be so required if the person to whom the supply is made were a taxable person'.—[Mr. Higgins.]

Schedule 3

VALUE OF SUPPLY—SPECIAL CASES

6.15 p.m.

Mr. Higgins: I beg to move Amendment No. 25, in page 106, line 18, leave out from 'person' to 'and' in line 19 and insert:

'carries on his business or part of his business by supplying to a number of individuals goods to be sold, whether by them or others, by retail'.
I understand that we can also discuss Amendment No. 26, in page 106, line 28, leave out 'that individual' and insert 'retail'.
We are making progress and I will endeavour to maintain the momentum. Amendments No. 25 and No. 26 achieve two diverse objectives.
Amendment No. 25 aims to meet criticisms of Schedule 3(2) made in Standing Committee and to put it beyond doubt that the paragraph is not intended to apply to occasional supplies such as might be made to charitable organisations, church bazaars and so on, but only to a systematic method of doing business. This is achieved by introducing the words:
carries on his business or part of his business by supplying …
which exclude occasional charitable gestures. We have had discussions already about charities. In Committee a number of hon. Members referred to the kind of situation where a firm is selling through private individuals who might then hold coffee mornings and so on. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) pointed out that this provision might inadvertently hit those who perhaps were holding a coffee morning for a charitable purpose.
I listened carefully to what the hon. Gentleman and others said in Committee. We have brooded on it and even believe that there might be some substance in what the Opposition said. It is not our intention to catch charitable coffee mornings but simply to prevent the distortion of competition by those seeking to sell goods as a matter of trade through such outlets. The Amendment will clarify the position of those holding charitable coffee mornings as opposed to commercial coffee mornings.
Amendment No. 26 applies to situations where there are or may in future be two or more non-taxable intermediaries between the taxable person and the final consumer. On further reflection, we agree that it is possible, by operating so to speak a two-tier system, that the provisions for prevention of distortion of competition might not have operated properly. Amendment No. 26 will therefore overcome a difficulty. I


am sure that the intention, which was generally accepted in Committee, that there should not be distortion of competition by those using this method of selling will now be more effectively carried out without the previous danger of evasion.

Mr. Joel Barnett: Little did we know in those long days and nights upstairs that, unbeknown to us, the Financial Secretary or someone else was taking note of all our hammering away at these provisions. I do not wish to be churlish. I am happy to accept the hon. Gentleman's explanation and clarification of the concession.

Amendment agreed to.

Amendment made: No. 26, in page 106, line 28, leave out 'that individual' and insert 'retail'.—[Mr. Higgins.]

Mr. Brian Walden: I beg to move Amendment No. 28, in page 106, line 44, leave out from 'Act' to end of line.
I gather from the fact that the Financial Secretary gave us very interesting comments on the law and common sense, and about which we have to back on different occasions, that he is in his clarification mood. Before he slips back into his, "It is so clear and comprehensive that it should be obvious even to the Opposition" mood, we want to press him on Amendment No. 28. Frankly, it is not terribly important and I do not want to waste too much time on it.
We wish to leave out these words not because they are obscure but because we are interested to know why they are there. We are also interested in what further discussions—since our debates in Committee—the Financial Secretary has had with the trade.
I have no doubt—subject to the caveat of my hon. Friend the Member for West Lothian (Mr. Dalyell)—that if we could be satisfied on those points the Amendment could be withdrawn.

Mr. Higgins: The hon. Member for Birmingham All Saints (Mr. Brian Walden) is always commendably brief. I wish that the explanations to the questions he asks so briefly could always be so short. That is not invariably the case.
The effect of the Amendment would be to exclude from the scope of VAT ser-

vice charges for the issue of luncheon vouchers, book tokens and other similar tokens of value. We do not share the view that they should be excluded from the tax, because we believe that it should be a broadly-based tax.
Schedule 3 paragraph 5 as drafted provides that the consideration for the issue of tokens of value shall be disregarded except to the extent that it exceeds the face value of the tokens. The result is that VAT will fall only on the service charge element of the consideration. The Amendment provides that the total consideration shall be disregarded so that, if the Amendment were pressed, and succeeded, no VAT would be payable. That would not be right. There was an Amendment in the opposite sense tabled during the Committee stage which was not debated then, probably for the reason mentioned by the hon. Gentleman, namely, that it was in some sense a probing Amendment.
It would not be right to single out service charges on tokens of value for relief. Most luncheon vouchers are supplied direct to traders, who issue them free to employees. Traders, who are taxable persons, will be able to take a tax credit for the tax on the service charge in the normal way. These service charges represent only a small additional percentage to the face value of a luncheon voucher. There have been no representations about its effect on those traders who may be exempt or partially exempt, for instance banks, who cease to use luncheon vouchers without attendant social consequences.
The position of book tokens and record tokens is different. Those are supplied almost exclusively to consumers. Service charges on these tokens are items of final consumer expenditure and it is appropriate that they should be subject to VAT.
The treatment proposed for other tokens of value is not altogether apt for trading stamp schemes. Power to adapt this paragraph and Clause 10 is therefore contained in Clause 29.
The hon. Gentleman asked what further discussions we had had with the trade. I did not clearly understand which form of token he meant. Could he clarify that point? I shall seek to answer it, although I suspect that I do not have the answer readily available.

Mr. Walden: Has there been any further discussion on book tokens?

Mr. Higgins: I cannot give the hon. Gentleman an immediate answer to that. We have held discussions on some aspects of this matter. I cannot say what the state of play is with regard to book tokens. If he wishes me to deal further with the matter, he can put down a Question, or use whatever method is appropriate to establish the answer.

Mr. Costain: What does my hon. Friend consider the position would be over the free glasses given away by petrol stations? Will they carry VAT up to the price paid for them by the petrol stations and then be free of VAT thereafter?

Mr. Higgins: My best answer is to refer the hon. Member to the discussions we had in Committee. The question is whether the article is or is not a gift. We went over that ground at considerable length in Committee. The hon. Member will find that the answers given were generally accepted and that the matter was understood at the end of the day. The point does not arise on this Amendment. The hon. Member for Birmingham, All Saints will no doubt pursue this matter. I hope that he will withdraw the Amendment.

Mr. Dalyell: By some very improper telegraphy I have intercepted signals. I gather that there have been no consultations with the book trade.
Having read yesterday's article in the Three Banks Review by Ivor Brown, there is a convincing argument to err on the side of generosity. I hope that the Treasury, during the discussions, will bear generosity in mind.

Mr. Walden: The Financial Secretary said that VAT ought to be a comprehensive tax. That tends to be an argument he uses for clarification.
I do not agree with what the Financial Secretary said about luncheon vouchers, although I take the point he made in that respect. Nor do I agree with him that because it falls on the final consumer it is appropriate that book tokens should be subject to VAT. That is a retrograde and foolish step. We did not put down the Amendment to precipitate discussion. We put it down to confirm

our worst suspicions. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Brian Walden: I beg to move Amendment No. 31, in page 107, line 8, at end insert:
(c) providing that a service charge of not more than ten per cent. of the bill shall not be treated as a supply for the purposes of calculating the tax.
This is a more serious Amendment. The Financial Secretary tells me that I have been commendably brief, so I may not have been making all the arguments. I shall speak to this Amendment at greater length. The point was raised in Committee and it need not be greatly laboured.
If VAT is levied on the service charge one will affect the way in which clients conducts themselves at hotels. We could have a long discussion on the ethics of tipping. The English used to find the service charge abhorrent but they have come to accept it. It seemed to us to be reasonable that it should not be treated as a supply for the purposes of calculating the tax unless it exceeded 10 per cent. There were reasons why that figure was chosen. It is a normal hotel charge.
Perhaps the Minister will tell me what he and the Treasury think will be the consequences of levying VAT on the service charge and whether they regard that consideration as being worth the comprehensiveness of the tax or whether it would not be sensible to maintain the service charge.

6.30 p.m.

Mr. Higgins: I do not think that there is ever any danger that in the brevity of his speeches the hon. Member for Birmingham, All Saints (Mr. Brian Walden) will fail to cover all the arguments. The hon. Gentleman invariably manages to compress a great deal of argument into a short speech.
The Amendment is strange, in that it makes a proviso with regard to
a service charge of not more than ten per cent. of the bill".
That would be a rather arbitrary limit, although it may have widespread use in various catering establishments. The object of the Amendment is to exclude any service charge which is not more than 10 per cent. of the bill from the


taxable value of a supply of services where the services consist of the provision of accomodation in a hotel, in a boarding house, or in a similar establishment.
The tax falls on the full value of a taxable supply, including any service charge itemised separately on the bill. This is consumer expenditure and, therefore, in a broadly based tax it falls, generally speaking, on consumption. It is right that it should be included. The proposal in the Amendment to limit relief to service charges below10 per cent. would complicate the administration of the tax and open the scope for abuse.
I will not weary the House by explaining a minor drafting point. As the hon. Gentleman said, we debated this matter at some length in Committee. We think that the procedure we suggest of taxing the service charge is the right one. It may be argued, as the hon. Gentleman has in mind, that tips would not be taxed, that any tax to service charges is inequitable, and that this will discourage attempts to move away from the less desirable form of tipping. There may be varying views on whether tipping is more desirable than a service charge or vice versa. This is not something on which the Government should necessarily express a view.
VAT is a tax on services however, and a service charge is part of a bill and is no different from any other charge for services, as the hon. Member for Heywood and Royton (Mr. Joel Barnett) conceded in Committee. It is common practice for a tip to be added even when there is a separate charge for service.
Even if we were not to proceed as proposed in the Bill but were to accept the Amendment, accounting and control would be made more difficult for traders and customers if the bill had to be apportioned as envisaged in the Amendment.
We cannot quantify what the cost of the Amendment would be, but it could be significant, because there is a considerable risk of abuse. For example, there could be a loading of the original cost of the taxable supplies such as the hotel accommodation and catering on to the service charge and encouragement to tipping at the same time, so there might be distortion.
Even if we were to accept the Amendment—for the reasons that I have given, it is not right to do so—the effect on the customer would be small. For example, if a hotel bill for a week before VAT was £20 and the service charge was 10 per cent., that would be £2. VAT just on the overall bill would be £2. VAT on the bill and the service charge would be £2·20. The net difference would be 20p or 1 per cent. of the total.
The hon. Gentleman did not seek to argue that this is a matter of great moment. I believe that the view we have taken is the correct one in these circumstances. Although there may be a difference of view between us, I hope that the hon. Gentleman will not press the Amendment to a Division.

Mr. Walden: By leave of the House, Mr. Speaker. I accept that there is probably a drafting weakness in the Amendment.
I cannot accept the hon. Gentleman's point about an apportionment. We shall not have a long debate about tipping, but if the Government will not state a position about it I am prepared to do so. It is better to have a straight service charge on a bill so that an employee is told, in effect, "You have given personal attention and this is the price for it". There is something less humiliating about that for the person who has given the service than for it to be a different arrangement under which he must individually cadge for a tip; that is a bad system. The continental system was always better and it has played a rôle in getting rid of the noxious servility which was one of the unpleasant points about service in Britain.
However, this is a "comprehensive" tax and this is an item of consumer expenditure. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 12

ZERO-RATING

Mr. Joel Barnett: I beg to move Amendment No. 29, in page 10, line 8, after 'description' insert 'other than food'.
Subsection (4) empowers the Government, by order, to bring into tax items


that are now zero-rated. The Opposition oppose this general power. The Amendment seeks to restrict the power so that the Government could not remove zero-rating on food by order. This is little enough to ask of the Government. They have stated that they do not propose to impose a tax on food. On the other hand, when I asked the Prime Minister recently if the commitment not to tax food was a permanent commitment I received no direct answer other than that the Prime Minister was not taxing food.
We suspect that it is the Government's intention to concede rather easily the question of the taxation of food. We do not wish them to concede it. The House knows that I favour British entry into the Common Market, but I must make clear that I utterly oppose taxation on food.
I want the Chancellor to say that he will not tax food. The Amendment merely asks that the Chancellor should concede that he should not have the power to impose, by order after a debate lasting an hour and a half at the end of a day, taxation on food.
If the Chancellor resists this modest Amendment, we can only assume that he is not prepared to fight, as we want him to, and insist that he will not agree to the taxation of food. In the debate on 10th May the Financial Secretary made the general case for resisting the Amendment then under discussion to withdraw the great powers to extend the scope of the tax by bringing in items which are now zero-rated. It is fair to sum up the Financial Secretary's contribution on that occasion by saying that the powers in any case have always been available under the purchase tax regulations and that the Government need the powers because anomalies may arise.
I do not concede the general case because I think that the powers are far too great in a tax as wide in scope as this one. If this provision is not amended we shall give the Government power to bring into tax items which have not been taxed to date, and what is more they will be able to do so by means of an order at the end of the day. Surely there cannot be a case for giving the Government this power in respect of food, unless it is intended at some time to slip in a tax on food by means of an order.
We all recall the now famous remarks of the Prime Minister about the rate of increase in prices generally. We know what has happened to prices in general and to food prices in particular. We do not ask for a commitment that the Chancellor will never tax food, although I am sure that the House and the country would welcome such a firm commitment. All that we ask for is a firm commitment that he will never tax food by means of an order. If the right hon. Gentleman does not accept this Amendment, the conclusion in the country must be that, on top of everything else, the Government intend to impose a tax on food.

Mr. Barber: I believe that I can set at rest the mind of the hon. Member for Heywood and Royton (Mr. Joel Barnett) ——

Mr. Barnett: Does the right hon. Gentleman want to bet?

Mr. Barber: I always live in hopes that the hon. Gentleman will be persuaded by cogent argument and reasoning. In passing I may say that I was surprised to hear him talk about taxing food. It was his Government which imposed SET on those who sell food, thereby putting up the price of food. However, we do not need to pursue that. It is well known in the country.
The objective of the Amendment is to remove from food the power at present contained in Clause 12(4) to vary by order the details of Schedule 4. The first point I make is that for reasons which I shall explain in a moment it is necessary for any Government to have powers to vary the details of the Schedule in order to have flexibility to deal with new developments. I might add that I think that such flexibility is especially important at the start of a new and wide-ranging tax.
The hon. Member for Heywood and Royton referred to the second point in passing. It is that there is a similar power contained in the Purchase Tax Act, 1963. That power enables the Treasury by order to make any change in the classes of goods which are chargeable goods and, secondly, to substitute either any lower rate or a higher rate at which tax is for the time being chargeable in respect of goods of another class.
That was a power which was available to the previous Government, as it


has been to this Government. It has been used to make borderline alterations to the Schedules. Where a new product comes on to the market which competes with products already subject to tax but which is not covered by the description in the appropriate group, an order can be made relatively quickly to amend the scope of the group. In this way the distortion of competition is minimised.
6.45 p.m.
It is right to remind the House that both under the previous Labour Government and under the Conservative Government that power has never been used to impose purchase tax on wide categories of goods. It is essentially an instrument for making borderline adjustments or more occasionally for securing overall reductions in taxation.
Obviously no Chancellor of the Exchequer can bind future Governments. Certainly I cannot bind a future Labour Government if there should be one—[Interruption.]. We have all had experience of the enormous increase in taxation under Labour Governments. Certainly I could not give an undertaking that the hon. Member for Heywood and Royton, were he ever to get to the Treasury, would not troop through the Division lobby imposing increases in direct and indirect taxation on the lines all too familiar to us under previous Labour Governments.
What I can and will do is willingly give an undertaking that there is no question of the powers contained in Clause 12(4) being used by this Government to impose a positive rate of tax generally on food. Putting it another way, this power will not be used to delete group 1 of Schedule 4. However, any Chancellor of the Exchequer must reserve the right if necessary to make marginal changes to the scope of the group. This could be necessary to remove anomalies which might arise following changes in technology, marketing techniques and so on. The point was discussed in Committee on 10th May when my hon. Friend the Financial Secretary explained the reasons why such changes might be necessary.
Having given the assurance that I have about the limitations that this Government will put upon the use of the power to change taxation by order, I am sure that the House will accept it, and I

hope that the hon. Member for Heywood and Royton will seek leave to withdraw his Amendment.

Mr. Joel Barnett: With the leave of the House, perhaps I might reply briefly to the Chancellor of the Exchequer. I noted what the right hon. Gentleman said, and I shall read again what he said with, I hope, the same amount of care as I assume he took in drafting his words. However, I hope that he will forgive me when I say that my suspicions remain when I hear him saying that he will never use the powers that he is taking.
The right hon. Gentleman has given an undertaking on behalf of his Government. Certainly I should not expect him to give an undertaking for any other Government. Indeed, I am not sure whether his undertaking on behalf of his own Government is all that good. We have seen various undertakings about other matters change. In June, 1970,we were told what would happen to the £ in two years if a Labour Government were returned, and we have seen what has happened to it in two years under a Conservative Chancellor of the Exchequer.
The right hon. Gentleman seemed to say that it was no this intention to use the powers which I seek to remove from the Bill. If he does not intend to use them while this Government are in office, why does he want them? If a future Government need the powers, that Government can seek to introduce them, though I repeat that to have powers as great as these for any goods, let alone for food, is a situation that I cannot accept.
The right hon. Gentleman began by saying that he needed these powers for flexibility to deal with new developments. He has just told us that one new development at least that we can accept will not arise is a development resulting in his needing to impose a tax on food. In those circumstances, I cannot see why he has resisted this Amendment, because the power to vary is not needed. He has already told us he is not going to use it, and I accept that.
Therefore I ask the House to support the Amendment to enable the Chancellor to carry out his undertaking.

Mr. Barber: May I just make this observation to the hon. Gentleman? He


said that he thought that powers such as these were too great for any Government, but this power is almost identical in respect of the generality of goods with the power his Government had. His Government obviously used the power very sparingly, and for the sort of purpose I have suggested we would use it if necessary—that is, to deal with changes in technology and marketing techniques and that sort of thing. I have given an absolutely firm assurance that as far as the Government are concerned there is no question that the powers contained in Clause 12(4) of the Finance Bill will be used to impose a positive rate of tax generally on food.
As I have made that clear, I should have thought that the hon. Gentleman would want to save time and press on in order that we may make a little further progress.

Mr. Denis Healey: Nobody is more anxious than I to make progress tonight but the Chancellor has not cleared up an ambiguity that is still in our minds. He has given us an assurance that he has no intention of using the powers in this Clause to impose a tax on food. Why, in that case, can he not accept the Amendment? Then he will have committed himself rather more finally than he did in his words a moment ago.
If he is not prepared to accept the Amendment, the only conclusion which we and the country can draw is that, while it is not his intention at this moment to use this power, his intention may change. It changed, for example, on floating. We all recall how many times he told the House, the International Monetary Fund and his prospective partners in the Common Market that he would not float and gave us all the arguments against it. Then, within a few hours a fortnight ago, he decided to float.
I must confess that the Chancellor's intentions do not appear to most of us in the House to be a sufficient guarantee of what the Government will do. If he accepted the Amendment—and I understand him to mean that in principle he accepts the Amendment—he would set our fears at rest and rob himself of the power to change his intention. That is what we are asking for.

Mr. Barber: With the leave of the House I will reply. I appreciate that it is not the right hon. Gentleman's fault that I need to reply, because he was not here when I was dealing with this matter. He was out of the Chamber, and I should have thought that he would have had sufficient confidence in his hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) to leave the reply to him. However, since he raised the matter, I hope that everyone will forgive me if I repeat what I said a moment ago.
Just as with previous Governments, so with this, there may be cases in which it is necessary to use this power in order to make marginal changes and to remove anomalies. I think it wholly irresponsible for someone who, if I may say so with great respect, aspires to be Chancellor of the Exchequer at some time to say, if I understood him aright, that he would remove this power and would not in any circumstances have a power of this kind to deal with anomalies and various marketing techniques.
Is that so? Is the right hon. Gentleman saying—and I think we are entitled to know, since he is pressing this Amendment to a Division—that he will give a firm assurance that when a Labour Government are in office at any time in the future he will remove this power from the legislation?

Mr. Healey: Since the Chancellor has asked me, I must remind him of this. The situation we face today on VAT is very different from that on the purchase tax because the Government have accepted a general obligation in agreeing to join the Community on the present terms to negotiate with them for the harmonisation of rates and coverage of the value added tax.
If the Financial Secretary is embarrassed by the point I am making, perhaps he will stand on his feet and intervene, but I am making this point. The fact is that the Government have accepted a general obligation to harmonise rates and coverage of the VAT with the Community. Every other member of the Community has a positive rate of value added tax on food. This is not a question of marginal adjustments to crisps or dealing with minor administrative problems. It is a question whether we pass a positive tax of, say,


7½ per cent., which is imposed by some members of the Community, on the whole of food in this country.
If it were ever the intention of a Labour Government to impose such a tax it would not seek to do so in a hole-and-corner way by making use of a power under an Act which the Chancellor himself has told us is intended to cover only marginal adjustments here and there. If it were ever the intention of a Labour Government—and I agree with the Chancellor that one cannot give an assurance for all time on all matters—to impose such a tax, we should regard this as a matter of such immense importance as to require special action.
All I am saying is this: if it is his intention—and it is very important that he should make this clear not only to the House but to his prospective partners in the enlarged Community—to resist pressure from all the other nine members of the Community to harmonise rates and coverage so that food is given a positive rating right across the board, as is the case with other members of the Community, then he must stand up and say so, and he must withdraw the power he gives himself to make such an immense extention of the coverage as is permitted under the Clause from which we are seeking to exclude food.
It seems to me that this is a perfectly fair point to put. If the Chancellor is claiming that the only reason he wants this paragraph is to make some tiny and marginal adjustments to some foodstuff or other from time to time, then we on this side of the House would concede that there is some justice in his case. But he cannot run away from the fact that he has accepted in general an obligation to harmonise rates and coverage. We are all conscious of the fact that the rate the Government have chosen for introducing the value added tax is well below the rate adopted by any other member of the Community.
The coverage is also far less extensive, for 45 per cent. of all consumer expenditure is excluded by the present zero-rating. But the Chancellor has given himself the power to adopt the continental system and he has accepted an obligation to reach a compromise with the

other members of the Community, which would undoubtedly involve including food, fares, housing—a whole variety of commodities which at present he has zero-rated.
Therefore, in view of the immense importance of this matter—and nobody is more conscious than the Chancellor, I think, of the importance to the working people of this country of keeping the cost of living down and keeping essentials outside the scope of the value added tax—I think he will find that it is in his own interest as Chancellor, embarked, as he is, on the most far-ranging talks with the CBI and the TUC about restraint on incomes and control of prices, to accept our Amendment, and I ask him so to do.

Mr. Barber: It has taken the right hon. Gentleman approximately six minutes to make it quite clear to the whole House that he is not prepared to answer my question and to give an assurance that a future Labour Government will withdraw this power. All I would say to him is this: it is a typical Labour Party gimmick in deference to those who were once fervent advocates of joining the Common Market but have now decided to put their squalid internal party manoeuvres before the principles for which they once stood.

7.0 p.m.

Mr. Brian Walden: On a completely different point, may I ask the Chancellor a question, because I am sure that we shall all be interested in the answer. I may be confused on this point but I am genuinely seeking knowledge. I took the Chancellor to be saying that it is not his intention—and he has therefore given us a pledge on that—to use the powers under this Clause in order to withdraw food from zero-rating. Do I take it that the Chancellor stresses "the power in this Clause" and that he has not given a pledge, as some might imagine, that it is not his intention to VAT food?
Do I understand that he has given no pledge that food will not be subject to VAT during the lifetime of this Government? Is what he has pledged that if it happens it will not happen under the powers in this Clause, which is a different proposition? Or is it not? Has the Chancellor given us a pledge that he will not negotiate VAT on food?

Mr. Barber: The hon. Gentleman will find that I dealt with that matter on 9th May, 1972, in column 1154 of the OFFICIAL REPORT.

Question put, That the Amendment be made:—

The House divided: Ayes 189, Noes 214.

Division No. 284.
AYES
[7.2 p.m.


Abse, Leo
Gordon-Walker, Rt. Hn. P. C.
Morris, Rt. Hn. John (Aberavon)


Albu, Austen
Gourlay, Harry
Moyle, Roland


Allaun, Frank (Salford, E.)
Grant, George (Morpeth)
Murray, Ronald King


Allen, Scholefield
Grant, John D. (Islington, E.)
Oakes, Gordon


Armstrong, Ernest
Griffiths, Eddie (Brightside)
Ogden, Eric


Ashton, Joe
Grimond, Rt. Hn. J.
O'Malley, Brian


Atkinson, Norman
Hamilton, William (Fife, W.)
Orbach, Maurice


Bagier, Gordon A. T.
Hamling, William
Orme, Stanley


Barnes, Michael
Hannan, William (G'gow, Maryhill)
Oswald, Thomas


Barnett, Guy (Greenwich)
Harper, Joseph
Owen, Dr. David (Plymouth, Sutton)


Barnett, Joel (Heywood and Royton)
Harrison, Walter (Wakefield)
Padley, Walter


Benn, Rt. Hn. Anthony Wedgwood
Hart, Rt. Hn. Judith
Palmer, Arthur


Bidwell, Sydney
Hattersley, Roy
Pardoe, John


Blenkinsop, Arthur
Healey, Rt. Hn. Denis
Parry, Robert (Liverpool, Exchange)


Boardman, H. (Leigh)
Heffer, Eric S.
Pavitt, Laurie


Booth, Albert
Horam, John
Peart, Rt. Hn. Fred


Boyden, James (Bishop Auckland)
Houghton, Rt. Hn. Douglas
Pentland, Norman


Broughton, Sir Aflred
Huckfield, Leslie
Prentice, Rt. Hn. Reg.


Brown, Hugh D. (G'gow, Provan)
Hughes, Rt. Hn. Cledwyn (Anglesey)
Price, J. T. (Westhoughton)


Buchan, Norman
Hughes, Mark (Durham)
Probert, Arthur


Buchanan, Richard (G'gow, Sp'burn)
Hughes, Robert (Aberdeen, N.)
Rankin, John


Butler, Mrs. Joyce (Wood Green)
Hughes, Roy (Newport)
Reed, D. (Sedgefield)


Callaghan, Rt. Hn. James
Janner, Greville
Roberts,Rt.Hn.Goronwy (Caernarvon)


Campbell, I. (Dunbartonshire, W)
Jay, Rt. Hn. Douglas
Rodgers, William (Stockton-on-Tees)


Cant, R. B.
Jenkins, Hugh (Putney)
Roper, John


Carmichael, Neil
Jenkins, Rt. Hn. Roy (Stechford)
Ross, Rt. Hn. William (Kilmarnock)


Castle, Rt. Hn. Barbara
John, Brynmor
Rowlands, Ted


Clark, David (Colne Valley)
Johnson, James (K'ston-on-Hull, W.)
Sandelson, Neville


Cohen, Stanley
Johnston, Russell (Inverness)
Sheldon, Robert (Ashton-under-Lyne)


Concannon, J. D.
Jones, Barry (Flint, E.)
Silkin, Rt. Hn. John (Deptford)


Conlan, Bernard
Jones, Dan (Burnley)
Silkin, Hn. S. C. (Dulwich)


Corbet, Mrs. Freda
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Silverman, Julius


Crawshaw, Richard
Jones, Gwynoro (Carmarthen)
Skinner, Dennis


Crossman, Rt. Hn. Richard
Jones, T. Alec (Rhondda. W.)
Small, William


Cunningham, G. (Islington, S W.)
Judd, Frank
Spriggs, Leslie


Dalyell, Tam
Kaufman, Gerald
Stallard, A. W.


Darling, Rt. Hn. George
Kerr, Russell
Steel, David


Davidson, Arthur
Kinnock, Neil
Stewart, Donald (Western Isles)


Davies, Ivor (Gower)
Lamond, James
Stewart, Rt. Hn. Michael (Fulham)


Davis, Terry (Bromsgrove)
Lawson, George
Stonehouse, Rt. Hn. John


Dell, Rt. Hn. Edmund
Lewis, Arthur (W. Ham, N.)
Strang, Gavin


Dempsey, James
Lewis, Ron (Carlisle)
Summerskill, Hn. Dr. Shirley


Doig, peter
Loughlin, Charles
Thomas,Rt.Hn.George (Cardiff,W.)


Douglas, Dick (Stirlingshire, E.)
Lyon, Alexander W. (York)
Thomas, Jeffrey (Abertillery)


Douglas-Mann, Bruce
Mabon, Dr. J. Dickson
Thomson, Rt. Hn. G. (Dundee, E.)


Driberg, Tom
McBride, Neil
Tinn, James


Duffy, A. E. P.
McCartney, Hugh
Tomney, Frank


Eadie, Alex
McElhone, Frank
Torney, Tom


Edelman, Maurice
Mackenzie, Gregor
Tuck, Raphael


Edwards, Robert (Bilston)
Mackintosh, John P.
Wainwright, Edwin


Edwards, William (Merioneth)
McNamara, J. Kevin
Walden, Brian (B'm'ham, All Saints)


Ellis, Tom
Mallalieu, J. P. W. (Huddersfield, E.)
Walker, Harold (Doncaster)


Evans, Fred
Marshall, Dr. Edmund
Wallace, George


Ewing, Henry
Mason, Rt. Hn. Roy
Weitzman, David


Faulds, Andrew
Mayhew, Christopher
Wellbeloved, James


Fitch, Alan (Wigan)
Meacher, Michael
Wells, William (Walsall, N.)


Fletcher, Ted (Darlington)
Mellish, Rt. Hn. Robert
White, James (Glasgow, Pollok)


Foley, Maurice
Mendelson, John
Willey, Rt. Hn. Frederick


Ford, Ben
Mikardo, Ian
Williams, Alan (Swansea, W.)


Forrester, John
Millan, Bruce
Wilson, Rt. Hn. Harold (Huyton)


Fraser, John (Norwood)




Freeson, Reginald
Milne, Edward



Gilbert, Dr. John
Molloy, William
TELLERS FOR THE AYES:


Ginsburg, David (Dewsbury)
Morris, Alfred (Wythenshawe)
Mr. James Hamilton and


Golding, John
Morris, Charles R. (Openshaw)
Mr. Donald Coleman.




NOES


Adley, Robert
Barber, Rt. Hn. Anthony
Blaker, Peter


Alison, Michael (Barkston Ash)
Batsford, Brian
Boardman, Tom (Leicester, S.W.)


Allason, James (Hemel Hempstead)
Bell, Ronald
Body, Richard


Amery, Rt. Hn. Julian
Bennett, Dr. Reginald (Gosport)
Boscawen, Robert


Archer, Jeffrey (Louth)
Berry, Hn. Anthony
Bowden, Andrew


Atkins, Humphrey
Biffen, John
Brinton, Sir Tatton


Balniel, Rt. Hn. Lord
Biggs-Davison, John
Brocklebank-Fowler, Christopher




Brown, Sir Edward (Bath)
Hordern, Peter
Proudfoot, Wilfred


Bruce-Gardyne, J.
Hornby, Richard
Pym, Rt. Hn. Francis


Buchanan-Smith, Alick(Angus,N&amp;M)
Hornsby-Smith,Rt.Hn.Dame Patricia
Quennell, Miss J. M.


Bullus, Sir Eric
Howe, Hn. Sir Geoffrey (Reigate)
Ramsden, Rt. Hn. James


Burden, F. A.
Howell, David (Guildford)
Rawlinson, Rt. Hn. Sir Peter


Butler, Adam (Bosworth)
Howell, Ralph (Norfolk, N.)
Redmond, Robert


Campbell, Rt.Hn.G.(Moray&amp;Nairn)
Hutchison, Michael Clark
Reed, Laurance (Bolton, E.)


Carlisle, Mark
Iremonger, T. L.
Rees-Davies, W. R.


Cary, Sir Robert
Irvine, Bryant Godman (Rye)
Rhys Williams, Sir Brandon


Chapman, Sydney
James, David
Ridley, Hn. Nicholas


Chichester-Clark, R.
Jenkin, Patrick (Woodford)
Rippon, Rt. Hn. Geoffrey


Churchill, W. S.
Jessel, Toby
Roberts, Michael (Cardiff, N.)


Clegg, Walter
Jones, Arthur (Northants, S.)
Roberts, Wyn (Conway)


Cooke, Robert
Jopling, Michael
Rossi, Hugh (Hornsey)


Coombs, Derek
Joseph, Rt. Hn. Sir Keith
Russell, Sir Ronald


Cooper, A. E.
Kellett-Bowman, Mrs. Elaine
St. John-Stevas, Norman


Corfield, Rt. Hn. Sir Frederick
Kimball, Marcus
Sandys, Rt. Hn. D.


Cormack, Patrick
King, Evelyn (Dorset, S.)
Scott-Hopkins, James


Costain, A. P.
King, Tom (Bridgwater)
Sharples, Sir Richard


Critchley, Julian
Kinsey, J. R.
Shaw, Michael (Sc'b'gh &amp; Whitby)


Dalkeith, Earl of
Kirk, Peter
Simeons, Charles


Davies, Rt. Hn. John (Knutsford)
Kitson, Timothy
Sinclair, Sir George


d'Avigdor-Goldsmid, Sir Henry
Knight, Mrs. Jill
Skeet, T. H. H.


Dean, Paul
Knox, David
Soref, Harold


Deedes, Rt. Hn. W. F.
Lamont, Norman
Speed, Keith


Digby, Simon Wingfield
Le Marchant, Spencer
Spence, John


Dixon, Piers
Lewis, Kenneth (Rutland)
Sproat, Iain


Dodds-Parker, Douglas
Lloyd, Ian (P'tsm'th, Langstone)
Stainton, Keith


Douglas-Home, Rt. Hn. Sir Alec
Loveridge, John
Stanbrook, Ivor


Eden, Rt. Hn. Sir John
Luce, R. N.
Stokes, John


Edwards, Nicholas (Pembroke)
McAdden, Sir Stephen
Stuttaford, Dr. Tom


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
MacArthur, Ian
Tapsell, Peter


Emery, Peter




Eyre, Reginald
McNair-Wilson, Michael
Taylor, Sir Charles (Eastbourne)


Fell, Anthony
Marten, Neil
Taylor,Edward M.(G'gow,Cathcart)


Fenner, Mrs. Peggy
Mather, Carol
Taylor, Frank (Moss Side)


Fidler, Michael
Maude, Angus
Taylor, Robert (Croydon, N.W.)


Fisher, Nigel (Surbiton)
Mawby, Ray
Tebbit, Norman


Fletcher-cooke, Charles
Maxwell-Hyslop, R. J.
Temple, John M.


Fookes, Miss Janet
Miscampbell, Norman
Thatcher, Rt. Hn. Mrs. Margaret


Fortescue, Tim
Mitchell, Lt. Col. C.(Aberdeenshire.W)
Thomas, John Stradling (Monmouth)


Foster, Sir John
Mitchell, David (Basingstoke)
Thompson, Sir Richard (Croydon, S.)


Fowler, Norman
Moate, Roger
Trafford, Dr. Anthony


Galbraith, Hn. T. G
Money, Ernle
Trew, Peter


Gardner, Edward
Monks, Mrs. Connie
Tugendhat, Christopher


Gilmour, Ian (Norfolk, C.)
Monro, Hector
Turton, Rt. Hn. Sir Robin


Glyn, Dr. Alan
Montgomery, Fergus
Vaughan, Dr. Gerard


Goodhart, Philip
Morgan, Geraint (Denbigh)
Vickers, Dame Joan


Goodhew, Victor
Morgan-Giles, Rear-Adm.
Walder, David (Clitheroe)


Gorst, John
Morrison, Charles
Walker-Smith, Rt. Hn. Sir Derek


Gower, Raymond
Mudd, David
Walters, Dennis


Grant, Anthony (Harrow C.)
Murton, Oscar
Ward, Dame Irene


Gray, Hamish
Neave, Airey
Weatherill, Bernard


Green, Alan
Nicholls, Sir Harmar
Wells, John (Maidstone)


Griffiths, Eldon (Bury St. Edmunds)
Noble, Rt. Hn. Michael
White, Roger (Gravesend)


Gurden, Harold
Normanton, Tom
Wilkinson, John


Hall, Miss Joan (Keighley)
Nott, John
Winterton, Nicholas


Hall, John (Wycombe)
Onslow, Cranley
Woodhouse, Hn. Christopher


Hamilton, Michael (Salisbury)
Oppenheim, Mrs. Sally
Woodnutt, Mark


Hannam, John (Exeter)
Owen, Idris (Stockport, N.)
Wylie, Rt. Hn. N. R.


Harrison, Brian (Maldon)
Page, Rt. Hn. Graham
Younger, Hn. George


Harrison, Col. Sir Harwood (Eye)
Page, John (Harrow, W.)



Hawkins, Paul
Parkinson, Cecil
TELLERS FOR THE NOES:


Higgins, Terence L.
Percival, Ian
Mr. Kenneth Clarke and


Hill, John E. B. (Norfolk, S.)
Powell, Rt. Hn. J. Enoch
Mr. Marcus Fox.


Hill, James (Southampton, Test)
Price, David (Eastleigh)



Holland Philip
Prior, Rt. Hn. J. M. L.

Question accordingly negatived

Schedule 4

ZERO-RATING

The Minister of State, Treasury (Mr. John Nott): I beg to move Amendment No. 32, in page 107, line 18, leave out paragraph (b) and insert:
'(b) a supply of anything comprised in any of the excepted items set out below, unless it

is also comprised in any of the items overriding the exceptions set out below which relates to that excepted item'.
I think it will be for the convenience of the House if I refer also to Amendments Nos. 33, 34 and 36, since they are all on very much the same point, and in due course move them formally.
These are technical Amendments designed to clarify the intention of Group 1 of the Schedule and in particular the relationship between excepted items and the


items over-riding the exceptions. In the present draft of Group 1, the items overriding the exceptions can apply to any of the excepted items. The result would be that the items overriding the exceptions would have a wider application than under purchase tax. For example, Item No. 6 includes preparations and extracts of meat. It is possible that this could be held to include tinned dog food, in which case the latter would be zero-rated, and this would be a reversal of the purchase tax position.
The Amendments are designed to relate each of the items overriding the exceptions to the exception corresponding to the purchase tax group from which it was derived, thus restoring the exact purchase tax borderline.

Amendment agreed to.

Further Amendments made: No. 33, in page 108, line 2, at end insert 'and preparations thereof'.

No. 34, in line 3, leave out 'and' and insert '3A'.—[Mr. Nott.]

Sir Stephen McAdden: I beg to move Amendment No. 35, in page 108, line 26, at end insert:
'Pure natural fruit juices or concentrates thereof'.
The House has been moving at a fairly rapid pace through the Amendments, and I have no desire to slow down the pace. I shall make my point shortly, and I hope that the Government will recognise the force of the argument and accept it without delay.
7.15 p.m.
I regard—as I think that most people outside the House do—pure fruit juice as a nutritional food. Although my remarks are concerned mainly with orange juice, they apply equally to grapefruit juice. There may be some fruit juices which are not nutritional and have no food value. If so, they can be spelled out and deleted from the reference which I am claiming for natural fruit juices.
There is no doubt that orange and grapefruit juices have a high nutritional value and are entitled to be regarded as food. Oranges are so regarded, because they are zero-rated. If oranges are zero-rated, it seems in all logic that if an orange is squeezed, the liquid extracted from it and the surplus water removed,

the product which is then supplied to the customer to add water and reconstitute it is just as much entitled to be treated as food as the orange itself. I cannot understand the logic which attempts to treat it differently from the orange itself.
This will probably be of benefit to many people. In these days when one has to be careful about one's interests, perhaps I should declare an interest, in that I am Chairman of the Anglo-Israel Parliamentary Group. It may be that this provision will be of benefit to the people of Israel. I do not think that that detracts from the argument. It will also benefit the people of Jamaica, of Honduras and even of the United States who send us some concentrated pure orange juice and also, I do not doubt, grapefruit juice. The basic point is that it is food, and the Government are committed not to tax food. That being so, there seems to be no sense or reason in taxing pure orange juice.
Quick-frozen concentrated orange juice consists only of the unadulterated natural solids of the fresh orange. It contains no additives or preservatives of any kind. It is obtained by pressing the orange immediately after harvesting and then partially eliminating the natural water content. The consumer, by replacing the "lost" water, is producing the same effect as he would by squeezing a fresh orange. The vitamin content is retained by the quick-freezing process, thus maintaining the food value of a fresh orange. I am sure that my hon. Friend would find it difficult to explain to his wife why she can buy a fresh orange without VAT, but if she dares to buy frozen orange juice she cannot do so without paying VAT.
This pure concentrate of fruit juice is not to be confused with orange squash and things of that kind which, whilst they make a refreshing and palatable drink, do not pretend to have anything like the nutritional value of pure orange and grapefruit juices. That pure fruit juice is regarded as a food is evidenced by the fact that most people drink it at breakfast. It is part of their breakfast diet. I hope that my hon. Friend will accept the case that I have made and accordingly zero-rate natural fruit juices.
The argument may be advanced that these juices were formerly subjected to purchase tax and therefore they ought to


be subject to VAT. I do not accept that. As they say in China: "Two wongs do not make a wight". I do not agree that because they were subject to purchase tax they ought to be subject to VAT. I hope that my hon. Friend will see the force of the argument and appreciate that natural juices are of high nutritional value and have been wrongly subjected to purchase tax. We cannot argue about that now, but this is the time to put the matter right and see that they are zero-rated for VAT.

Mr. Dalyell: It is a pity that the hon. Member for Southend, East (Sir S. McAdden) did not have the wind to read on. He and I have the same brief. He left out a rather choice sentence. The brief continues:
This product is in reality the orange itself with the unwanted materials removed and should, we believe, be classified as a food.
I do not know what the unwanted materials are; nevertheless, we can guess. This is a fairly convincing brief that we have from Mr. E. Hall, of the National Association of Frozen Food Producers.

Sir S. McAdden: The unwanted materials are the skin, the pith and so on.

Mr. Dalyell: Obviously the hon. Member for Southend, East is a great expert on the natural orange. But the brief continues:
As a food, oranges themselves are zero-rated; there can surely be no good reason for treating the frozen concentrated juice any differently. Without the present or proposed tax, the major companies concerned would reduce the retail price by 2p per 6¼ fluid ounces.
I think that most of us who served on the Standing Committee do not produce briefs in which we do not believe. I believe in this one. There is a good case for it. We look forward to what the Minister has to say.

Mr. Charles Morrison: I support my hon. Friend the Member for Southend, East (Sir S. MacAdden) on this Amendment.
The first occasion on which I attended a Conservative Party Conference was in 1963, when it took place in Blackpool. I remember arriving, rather late at night, at a boarding house a long way down the shore from the conference centre. The next morning I came down to break-

fast. I looked at the menu. It started off with three possibilities: fruit juice, cereals, and porridge. I asked for fruit juice. What arrived at the table was a small glass of lukewarm, very dilute orange squash. Literally, it left a nasty taste in the mouth. It gave me a rather unfortunate first insight in Blackpool.
Until I became aware of the purchase tax regulations, indeed, until this Bill was published, that was the only occasion I have known when orange squash has been muddled and bracketed with orange juice. I cannot help wondering whether there is not some connection between the two events. My right hon. Friend the Chancellor is extremely well advised and, not least, he has the assistance in his deliberations of my hon. Friend the Member for Blackpool, South (Mr. Blaker). Could it be that he, too, believes what might well be a popular Blackpool fallacy: that orange squash and orange juice are one and the same and should be treated similarly? Could that be the source of the advice to the Chancellor on the Bill?
The fact is that orange squash is not normally drunk for breakfast, but sometimes orange juice is and it is drunk as such as an alternative to, but in the same bracket as, porridge or cereals. Therefore, I believe that it is a food and should be treated as such in relation to value added tax. For that reason, I hope that my hon. Friend the Minister will be able to make a concession on this point.

Mr. Brian Walden: It will not surprise the hon. Member for Southend, East (Sir S. MacAdden) that nothing whatsoever would persuade me to touch this noxious stuff, least of all the argument that it would do me good. All the exciting things in life are the things that do not do one good. Nevertheless, I shall be very interested to hear the Government's case on this point.
I think that the brief is right. To all intents and purposes this is the orange. It is difficult to explain—not in the case of squash; I accept that—but in the case of pure juice why there should be a differential treatment here. As I anticipate that the Minister will make a concession, the Opposition need say no more about it.

Mr. Ian Lloyd: I have one observation on the Amendment, which obviously refers to a matter of great pith and moment. Clearly what we are talking about is the progress in the container which is used to transport orange juice, the progress from that provided by nature to that invented by man. The last thing that my right hon. Friend the Chancellor would want to do is to black a container.

Mr. Nott: In moving his Amendment, my hon. Friend the Member for Southend, East (Sir S. McAdden) said that he hoped that either I or himself would have no difficulty in explaining this matter to our respective wives. I cannot give him that assurance, because all of us have certain difficulties on occasions in that direction. But I hope that I shall make good progress in explaining to the House the reason why we cannot accept the Amendment.
Hon. Members will all have received this particular brief, as I have. It arrived on the famous breakfast table which has been referred to. As the sponsors of the Amendment—if I may describe them as such—have sponsored a large extensive advertisement in The Times recently, this matter merits a full reply.
The object of the Amendment is to zero-rate pure natural fruit juice. My hon. Friend made the point that its effect would be to relieve from tax certain items which are already taxed. In this way, it would change the present borderline between taxed and untaxed foods. As the House will know, the decision to tax at the standard rate of food and drink currently subject to purchase tax was taken principally for revenue reasons. To zero-rate all such items would have led to revenue losses of about £110 million in a full year, and thus it would have led to a rise in the rate of value added tax.
At a time when the Government were introducing a comprehensive tax on consumer expenditure, it would have been inappropriate to remove from tax goods already subject to purchase tax, for by doing so we would have set off widespread claims for relief from others concerned with purchase-taxed food.
Fruit juices are aimed at the breakfast table market. I noted with interest—I cannot say "with sympathy" in view of

the experiences of my hon. Friend the Member for Devizes (Mr. Charles Morrison) at his boarding house at Blackpool—that the ice cream and potato crisps industries have also based their claim for relief on the fact that their products are increasingly used as part of breakfast, although not necessarily so, or at any rate part of a main meal.
The House will appreciate that if we had removed any one item from among the group of foods now subject to purchase tax, the continuity of the move from purchase tax to VAT would have been broken. I appreciate that the claim is made—particularly by the Americans, as I understand it—that concentrated juice is similar in all ways to fresh fruit. No preservatives or other adulterants are added to the juice, and only water is extracted. My hon. Friend the Member for Southend, East made that point.
For a number of years representations have been made on this subject, through advertisements in the Press and letters to Members of Parliament, which we have all had recently, attempting to obtain purchase tax relief for this industry. I should point out that last year the rate of purchase tax on these items amounted to 22 per cent. The current rate of purchase tax on food is 18 per cent. of the wholesale value. On average, this is equivalent, in terms of VAT, to about 12½ per cent. in retail terms. My right hon. Friend's proposal to recommend a rate of 10 per cent. will lead to yet another reduction in the rate of taxation on these foods. I am sure that would bring satisfaction to the industry.
As the House has been told on many occasions the overriding effect of the Chancellor's proposal for the reform of indirect taxation will be to reduce the burden of tax on food in this country. SET is being abolished when VAT is introduced and SET fails to some extent on the distribution of food.
My right hon. Friend the Chancellor has already reduced the rate of purchase tax on these foods, and the introduction of VAT will lead to further reduction in tax. As we cannot have a broken line appearing between the purchase tax foods for one separate item I hope my hon. Friend will see fit to withdraw his Amendment.

7.30 p.m.

Mr. Brian Walden: The Minister of State's reply puzzles me. At one stage I thought that when it was said that orange juice was an absolutely natural foodstuff with the water taken out the Minister of State would say that it was not, but he did not. He referred to VAT and SET and the rates of purchase tax. I wonder he did not say that if the economy grew by 5 per cent. people would be able to buy more anyway. He has turned the Amendment down flat on the ground that the situation is better than it was before. I am sure that the hon. Member for Southend, East (Sir S. McAdden) is under no illusions about the reply and I still do not understand why the Minister says we cannot draw the line here. Why? It seems a very sensible place to draw a line since he has not disproved the fact that it is a food.

Mr. George Wallace: One point has been completely overlooked. Orange juice is not necessarily consumed at breakfast. It is also a very nutritional food containing vitamin C, which is an important factor in children's health. There is in my constituency a factory owned by a very well known manufacturer of baby food and baby food juices. These products are subject to tax. The Government have said they are not taxing food, but they are taxing baby food. That should be borne in mind. I hope that the Minister of State's reply will not be accepted.

Sir S. McAdden: In view of what my hon. Friend the Minister of State has said, and while I do not accept his argument completely, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment made: No 36, in page 108, line 32, at end insert:
'(4) Items 1 to 3 of the items overriding the exceptions relate to item 2 of the excepted items and items 4 to 6 of the items overriding the exceptions relate to item 3A of the excepted items'.—[Mr. Barber.]

Mr. Sheldon: I beg to move Amendment No. 38, in page 109, line 4, at end insert:
'7. Microfilm reproductions of books, booklets, brochures, pamphlets and leaflets'.
The Amendment seeks to zero-rate microfilm reproductions of books, book-

lets, pamphlets, brochures and leaflets. The reason for it was brought out in the original discussion initiated by my hon. Friend the Member for Edmonton (Mr. Albu). He pointed out, because of his particular interest in a firm engaged in the introduction of microfilm for this purpose, the way in which to a considerable extent it is replacing the use of books in certain spheres. A microfilm is made of a book and it can be stored in a very small place. That enables a very large library to be reduced to a very small volume.
The equipment used for the purpose both for recording the microfilm and for reproducing it, is of a very specialised kind. It enables research workers, universities and so on to have readily to hand a vast range of documents, papers, books and pamphlets in a way that would be impossible except for the largest of libraries. The case is clearly made because the technological growth of this development is such that it will change the way in which research workers operate.
My first question to the Financial Secretary is why, with a system which is directly concerned with books, the only function of which is to provide the same kind of reading as is obtained from books but in a smaller volume, is he not prepared to zero-rate it in the same way as he is zero-rating books, pamphlets and so forth?
The Chancellor of the Exchequer has an Amendment on the Order Paper which we shall discuss in due course in which he concedes that talking books for the blind shall be zero-rated, a move that we shall welcome. The Amendment will allow a magnetic tape specially adapted for the reproduction of speech for the blind, together with the tape recorders and the parts and accessories which will enable the blind to hear the talking books, to be zero-rated. The Chancellor has accepted that there can be a case for books which are in a form which books do not normally assume. He accepts the case for books and he accepts the case for talking books on magnetic tape. Why does he not accept the case for books on microfilm? This is the third category of books in an unconventional form that will be discussed today.
The Chancellor argued on a previous occasion that the matter was unimportant because the microfilm was used by large companies and the large companies would be able to claim the input for their books. But this is only one small part of it. As well as the universities, the research workers themselves will use this tool increasingly. The research worker or author deciding to publish some learned volume requires a whole mass of material of a kind he finds increasingly difficult to store—and difficult to obtain access to it. The use of the microfilm will obviously facilitate his work but he will be unable to gain any offset against the tax.
If we do not accept the Amendment we shall be taxing books and taxing knowledge in precisely the same way that was attempted during the early war years when purchase tax was introduced. People who can recall those debates, in which it was stated that purchase tax would be a broadly based tax covering large sections of commodities, will remember that it was fiercely resisted in this respect because it was regarded as a tax on knowledge, something the British people had always opposed. In so far as this is a tax on knowledge of a special kind, I see no grounds for the Chancellor rejecting the Amendment.

Mr. William Hamling: My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) is wrong when he says that the Amendment refers to books in an unconventional form. Any research student will know that it is a very conventional form these days. I think of many works of scholarship which are out of print and which can be read only by going to Goldsmiths' Library at the LSE, Colindale, the Picton Reference Library or one of the other large establishments and reading them by means of the microfilm projectors. Many research students—I must declare an interest here—owe their acquisition of spectacles to the fact that they have spent so many years straining their eyes looking at microfilm through projectors. My own use of spectacles dates from that. Therefore, there may be an indirect medical advantage in the Treasury's refusal to consider the Amendment, but I am sure the Financial Secretary will not consider that tonight.
Universities will not be affected. I wonder whether libraries which are exempt will pay value added tax on the microfilms that they obtain. They should not pay it. There is no material difference between the use of books in reference libraries and the use of microfilms, which fulfil the same purpose and are only another form of book. That is particularly true of brochures, pamphlets and leaflets. Anyone who knows anything about social history and the researches in it knows very well that more research students rely on microfilms of pamphlets, brochures and leaflets, particularly because some of the leaflets used can be obtained only in microfilm form. I think particularly of research into the social history of the nineteenth century. The best way to preserve such documents is to microfilm them. They can be preserved much better like that than in an obscure place collecting dust where they end up by literally falling apart.
It can therefore be seen that microfilms are absolutely essential for students and researchers. The case for the Amendment is so obvious that I need not detain the House any longer.

7.45 p.m.

Mr. Higgins: I cannot accept that the case is so obvious that the House need not be detained any longer on it. The matter was debated briefly in Committee, and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) has deployed the arguments again.
It is important to distinguish between books as such and microfilm reproductions of booklets and so on. The hon. Gentleman also spoke about talking books for the blind. There are a later Government Amendment and another Amendment on that subject, which is quite separate. It so happened that the two were, by chance, discussed together in Committee on the Floor of the House, but they are quite different cases.
I do not think it can be argued that microfilm is a form of reading matter, used in conjunction with the equipment necessary to read it, which is widespread in the average household or among private users. As the hon. Member for Woolwich, West (Mr. Hamling) said, it is largely used in institutions such as libraries, museums and so on.
As became apparent in Committee, there are two possible aspects to the question—microfilms of the kind discussed today and microfilms used in the process of manufacturing books. I pointed out in Committee that if the books were zero-rated any input tax charged on the microfilm would be cancelled out by the normal workings of the credit mechanism, so we need not refer to that any further.
I turn to the main thread of the argument. It is certainly the case that the microfilms are used very largely in institutions. We must have regard to the problem of drawing the line. If we accepted the Amendment, there would be pressure to relieve instruments for viewing microfilms. People would ask, "Why not make the same concession for other kinds of film? If the concession is made for viewing apparatus, why not make it for equipment on which holiday slides and so on are viewed?" Once we start on that slippery slope, it is very difficult to see where to draw the line.
Therefore, it is right to draw it where it is now in the Bill, not only because the items we are discussing are physically distinguishable from books but also because they are used very largely by institutions. The institutions are likely to be in various possible positions with regard to VAT. For example, an institution may be a taxable person. Quite a number of institutions may make a charge for admission or for the use of the microfilm. If they are taxable persons, the VAT will normally be charged. Any tax which is charged on the microfilm would be an input tax in the normal way, and would be cancelled out by the normal workings of the credit mechanism.

Mr. Hamling: Is the criterion to be, then, that an institution charges an admission fee? I hope we shall not pursue that, because it would include museums and art galleries which use microfilms a great deal. For example, the National Maritime Museum has many students who use microfilms. I hope that the criterion is not simply that the institution charges an admission fee.

Mr. Higgins: No, Sir. That is not the criterion. I am saying that one situation in which microfilms might be used is where the person providing the microfilm

facility is a taxable person. I understand what the hon. Gentleman is saying about the National Maritime Museum, because he and I frequently attend that institution.
If a person providing the microfilm were a taxable person—the point I make will be familiar to all who serve in Committee—output tax would be charged and the taxable person would have to deduct the input tax on the microfilm. The alternative position is that it might be a local authority library or museum which was not a taxable person. It still would not suffer any net burden because any input tax incurred would be refunded to the local authority by virtue of Clause 15. In that circumstance also, the charge would not be a burden on the institution providing the facility.
The other possible situation is the case of non-local authority libraries which are not taxable persons and, in particular, university libraries. Most university libraries will probably not be taxable persons. If they are not, they may well use microfilms for non-taxable purposes whether or not they are a taxable person. Either way most university libraries in this position will be treated in the same way as the university sector. My hon. Friend the Chief Secretary in the debate on 16th May made clear what was the position for educational bodies. He said:
Our intention is that educational bodies which receive grants direct from central Government shall neither gain nor lose as a result of the tax changes—the introduction of VAT and the abolition of purchase tax and SET. The grants to these bodies will continue to be related to their estimates of income and expenditure. Once the tax changes are in force, they will be reflected in the prices paid by the bodies concerned for their purchases of goods and services and will, therefore, be reflected in their estimates of future expenditure. Thus, the incidence of tax will be taken into account automatically when the grants to these bodies are settled."—[Official Report, 16th May, 1972; Vol. 837, c. 417.]
He went on to elaborate the position.
Generally speaking these microfilm facilities are provided by those who, one way or another, will be relieved of the tax. Other than that it is intended to be a comprehensive tax. There are clearly some line-drawing problems. I believe it is right to draw them where we have drawn them for the reasons I have given. I cannot advise the House to accept the Amendment.

Mr. Dalyell: I do not want to make heavy weather of this because we recognise that there are so many separate institutions which might have been hit and which have been greatly alleviated. Nevertheless, there is a fundamental question here and that is the extent to which we want to use the fiscal system biased in favour of things that society wants to do and against those things that society does not want to do. We come back to all the arguments we had in Committee on recycling pollution related to the use of the fiscal system. I know that in modern technical industries there is every reason for encouraging the use of familiarity with microfilms and I would have thought, on that principle, that there was an argument for biasing the tax system in this direction.
Here again we come to the related point whether microfilm has the closest affinity with books. I would argue that it does have a closer affinity with books than with film. It was when the Financial Secretary produced his argument on this that I felt I had to intervene. I would have sat there mouselike——

Mr. Hamling: Never!

Mr. Dalyell: Yes, post-prandial, mouse like. When the Financial Secretary says that everyone taking snapshots of the family holidays and everything else will want to be zero-rated, when he brought out this great panoply of unlikely events, I thought it sufficient to make this point.

Mr. Sheldon: By leave of the House. The reply by the Financial Secretary was much less than adequate and I should be failing in my duty if I did not criticise him for this. I would never have described my hon. Friend the Member for West Lothian (Mr. Dalyell) as "mouse like". Whatever his mood, he made a powerful point. He wanted to see a bias in favour of these new systems. Perhaps he was leaning over the other way. At any rate it is a better way to lean when talking about books and the dissemina-

tion of information rather than taking the attitude of the Financial Secretary who is doing his best to bring them into the tax bracket.

Of course these things are not in wide use in the home. It is well known that microfilm is a method of obtaining the advantages of making available large amounts of material which otherwise it would not be possible to do. It is not good enough to talk about those cases where it does not matter, because there are many cases where it does matter and those cases are obviously with the research worker, and in private libraries, an area which unfortunately we have not mentioned. These will obviously be subject to this tax and it is something that we should deplore.

It was wrong to talk about this "slippery slope". The same thing can be said about books. It can be said that books resemble novelettes, novelettes resemble comics, comics resemble give-away sheets and therefore we had better tax books as well. The slippery slope is there no less than it is with microfilm. It is said that microfilm may be used in projectors, but anyone who knows anything about these things knows that anyone who took a microfilm from the library and tried to put it in a projector knows as much about the technology of this as the Financial Secretary seems to know.

It is not good enough, when we have something as closely akin to books, and even more closely akin to books than the sound records for the blind which are zero-rated, that these, too, should not be zero-rated. If the Government have seen fit to zero-rate those products they should zero-rate the other products of the same kind of technology.

I must therefore ask my hon. Friends to divide the House.

Question put. That the Amendment be made:—

The House divided: Ayes 186, Noes 208.

Division No. 285.]
AYES
[8.0 p.m.


Abse, Leo
Barnett, Guy (Greenwich)
Bradley, Tom


Albu, Austen
Barnett, Joel (Heywood and Royton)
Broughton, Sir Alfred


Allen, Scholefield
Benn, Rt. Hn. Anthony Wedgwood
Brown, Hugh D. (G'gow, Provan)


Ashton, Joe
Bidwell, Sydney
Buchan, Norman


Atkinson, Norman
Blenkinsop, Arthur
Buchanan, Richard (G'gow, Sp'burn)


Bagier, Gordon A. T.
Booth, Albert
Butler, Mrs. Joyce (Wood Green)


Barnes, Michael
Boydon, James (Bishop Auckland)
Campbell, I. (Dunbartonshire, W.)




Cant, R. B.
Horam, John
Owen, Dr. David (Plymouth, Sutton)


Carmichael, Neil
Houghton, Rt. Hn. Douglas
Padley, Walter


Castle, Rt. Hn. Barbara
Howell, Denis (Small Heath)
Palmer, Arthur


Clark, David (Colne Valley)
Huckfield, Leslie
Pardoe, John


Cohen, Stanley
Hughes, Rt. Hn. Cledwyn (Anglesey)
Parry, Robert (Liverpool, Exchange)


Coleman, Donald
Hughes, Mark (Durham)
Pavitt, Laurie


Concannon, J. D.
Hughes, Robert (Aberdeen, N.)
Peart, Rt. Hn. Fred


Conlan, Bernard
Hughes, Roy (Newport)
Pentland, Norman


Corbet, Mrs. Freda
Janner, Greville
Prentice, Rt. Hn. Reg.


Crawshaw, Richard
Jay, Rt. Hn. Douglas
Price, J. T. (Westhoughton)


Crosland, Rt. Hn. Anthony
Jenkins, Hugh (Putney)
Probert, Arthur


Crossman, Rt. Hn. Richard
Jenkins, Rt. Hn. Roy (Stechford)
Rankin, John


Cunningham, G. (Islington, S.W.)
John, Brynmor.
Reed, D. (Sedgefield)


Dalyell, Tam
Johnson, James (K'ston-on-Hull W.)
Rhodes, Geoffrey


Darling, Rt. Hn. George
Jones, Barry (Flint, E.)
Rodgers, William (Stockton-on-Tees)


Davidson, Arthur
Jones, Dan (Burnley)
Roper, John


Davies, Ifor (Gower)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Ross, Rt. Hn. William (Kilmarnock)


Davis, Terry (Bromsgrove)
Jones, Gwynoro (Carmarthen)
Rowlands, Ted


Dell, Rt. Hn. Edmund
Jones, T. Alec (Rhondda, W.)
Sandelson, Neville


Dempsey, James
Judd, Frank
Sheldon, Robert (Ashton-under-Lyne)


Doig, Peter
Kaufman, Gerald
Silkin, Rt. Hn. John (Deptford)


Douglas, Dick (Strilingshire, E.)
Kelley, Richard
Silkin, Hn. S. C. (Dulwich)


Douglas-Mann, Bruce
Kerr, Russell
Silverman, Julius


Driberg, Tom
Kinnock, Neil
Skinner, Dennis


Duffy, A. E. P.
Lamond, James
Small, William


Eadie, Alex
Lawson, George
Spriggs, Leslie


Edelman, Maurice
Lewis, Arthur (W. Ham, N.)



Edwards, Robert (Bilston)
Lewis, Ron (Carlisle)
Stallard, A. W.


Edwards, William (Merioneth)
Loughlin, Charles
Stewart, Donald (Western Isles)


Ellis, Tom
Lyon, Alexander W. (York)
Stewart, Rt. Hn. Michael (Fulham)


Evans, Fred
Mabon, Dr. J. Dickson
Stonehouse, Rt. Hn. John


Ewing, Henry
McBride, Neil
Strang, Gavin


Faulds, Andrew
McCartney, Hugh
Summerskill, Hn. Dr. Shirley


Fitch, Alan (Wigan)
McElhone, Frank
Taverne, Dick


Fletcher, Raymond (Ilkeston)
Mackenzie, Gregor
Thomas,Rt.Hn.George (Cardiff,W.)


Foley, Maurice
McNamara, J. Kevin
Thomas, Jeffrey (Abertillery)


Forrester, John
Mallalieu, J. P. W. (Huddersfield, E.)
Tinn, James


Freeson, Reginald
Marquand, David
Tomney, Frank


Gilbert, Dr. John
Mason, Rt. Hn. Roy
Torney, Tom


Ginsburg, David (Dewsbury)
Mayhew, Christopher
Tuck, Raphael


Golding, John
Meacher, Michael
Wainwright, Edwin


Gordon Walker, Rt. Hn. P. C.
Mellish, Rt. Hn. Robert
Walden, Brian (B'm'ham, All Saints)


Gourlay, Harry
Mendelson, John
Walker, Harold (Doncaster)


Grant, George (Morpeth)
Mikardo, Ian
Wallace, George


Grant, John D. (Islington, E.)
Millan, Bruce
Wells, William (Walsall, N.)


Griffiths, Eddie (Brightside)
Milne, Edward
White, James (Glasgow, Pollok)


Hamilton, James (Bothwell)
Mitchell, R. C. (S'hampton, Itchen)
Whitehead, Phillip


Hamilton, William (Fife, W.)
Molloy, William
Willey, Rt. Hn. Frederick


Hamling, William
Morris, Alfred (Wythenshawe)
Williams, Alan (Swansea, W.)


Hannan, William (G'gow, Maryhill)
Morris, Charles R. (Openshaw)
Wilson, Rt. Hn. Harold (Huyton)


Hardy, Peter
Morris, Rt. Hn. John (Aberavon)
Orme, Stanley


Harper, Joseph
Moyle, Roland
Oswald, Thomas


Harrison, Walter (Wakefield)
Murray, Ronald King



Hart, Rt. Hn. Judith
Oakes, Gordon
TELLERS FOR THE AYES:


Hattersley, Roy
Ogden, Eric
Mr. Ernest Armstrong and


Healey, Rt. Hn. Denis
O'Malley, Brian
Mr. James Wellbeloved.


Heffer, Eric S.
Orbach, Maurice





NOES


Adley, Robert
Buchanan-Smith, Alick(Angus,N&amp;M)
Dixon, Piers


Alison, Michael (Barkston Ash)
Bullus, Sir Eric
Eden, Rt. Hn. Sir John


Allason, James (Hemel Hempstead)
Burden, F. A.
Edwards, Nicholas (Pembroke)


Amery, Rt. Hn. Julian
Butler, Adam (Bosworth)
Elliott, R. W. (N'c'tle-upon-Tyne,N.)


Archer, Jeffrey (Louth)
Campbell, Rt.Hn.G.(Moray&amp;Nairn)
Emery, Peter


Atkins, Humphrey
Carlisle, Mark
Eyre, Reginald


Balniel, Rt. Hn. Lord
Chapman, Sydney
Fell, Anthony


Barber, Rt. Hn. Anthony
Chichester-Clark, R.
Fenner, Mrs. Peggy


Batsford, Brian
Churchill, W. S.
Fidler, Michael


Bell, Ronald
Clark, William (Surrey, E.)
Fisher, Nigel (Surbiton)


Bennett, Dr. Reginald (Gosport)
Clarke, Kenneth (Rushcliffe)
Fletcher-Cooke, Charles


Benyon, W.
Clegg, Walter
Fookes, Miss Janet


Biffen, John
Cooke, Robert
Fortescue, Tim


Biggs-Davison, John
Corfield, Rt. Hn. Sir Frederick
Foster, Sir John


Blaker, Peter
Cormack, Patrick
Fowler, Norman


Boardman, Tom (Leicester, S.W.)
Costain, A. P.
Galbraith, Hn. T. G.


Body, Richard
Critchley, Julian
Gilmour, Ian (Norfolk, C.)


Boscawen, Robert
Dalkeith, Earl of
Glyn, Dr. Alan


Bowden, Andrew
Davies, Rt. Hn. John (Knutsford)
Goodhew, Victor


Brinton, Sir Tatton
d'Avigdor-Goldsmid, Sir Henry
Gorst, John


Brocklebank-Fowler, Christopher
Dean, Paul
Gower, Raymond


Brown, Sir Edward (Bath)
Deedes, Rt. Hn. W. F.
Grant, Anthony (Harrow, C.)


Bruce-Gardyne, J.
Digby, Simon Wingfield
Gray, Hamish







Green, Alan
Mather, Carol
Sharples, Sir Richard


Griffiths, Eldon (Bury St. Edmunds)
Maude, Angus
Shaw, Michael (Sc'b'gh &amp; Whitby)


Gurden, Harold
Mawby, Ray
Simeons, Charles


Hall, Miss Joan (Keighley)
Maxwell-Hyslop, R. J.
Sinclair, Sir George


Hall, John (Wycombe)
Miscampbell, Norman
Skeet, T. H. H.


Hall-Davis, A. G. F.
Mitchell,Lt.-Col.C.(Aberdeenshire,W)
Soref, Harold


Hamilton, Michael (Salisbury)
Mitchell, David (Basingstoke)
Speed, Keith


Hannam, John (Exeter)
Moate, Roger
Spence, John


Harrison, Brian (Maldon)
Money, Ernle
Sproat, Iain


Higgins, Terence L.
Monks, Mrs. Connie
Stainton, Keith


Hill, John E. B. (Norfolk, S.)
Monro, Hector
Stanbrook, Ivor


Hill, James (Southampton, Test)
Montgomery, Fergus
Stokes, John


Holland, Philip
More, Jasper
Stuttaford, Dr. Tom


Hornby, Richard
Morgan, Geraint (Denbigh)
Tapsell, Peter


Hornsby-Smith,Rt.Hn.Dame Patricia
Morgan-Giles, Rear-Adm.
Taylor, Sir Charles (Eastbourne)


Howe, Rt. Hn. Sir Geoffrey (Reigate)
Morrison, Charles
Taylor,Edward M.(G'gow,Cathcart)


Howell, David (Guildford)
Mudd, David
Taylor, Frank (Moss Side)


Howell, Ralph (Norfolk, N.)
Murton, Oscar
Taylor, Robert (Croydon, N.W.)


Hutchison, Michael Clark
Neave, Airey
Tebbit, Norman


Iremonger, T. L.
Noble, Rt. Hn. Michael
Temple, John M.


Irvine, Bryant Godman (Rye)
Normanton, Tom
Thomas, John Stradling (Monmouth)


James, David
Nott, John
Thompson, Sir Richard (Croydon, S.)


Jenkin, Patrick (Woodford)
Onslow, Cranley
Trafford, Dr. Anthony


Jessel, Toby
Oppenheim, Mrs. Sally
Trew, Peter


Jones, Arthur (Northants, S.)
Owen, Idris (Stockport, N.)
Tugendhat, Christopher


Jopling, Michael
Page, Rt. Hn. Graham
Turton, Rt. Hn. Sir Robin


Joseph, Rt. Hn. Sir Keith
Parkinson, Cecil
van Straubenzee, W. R.


Kaberry, Sir Donald
Percival, Ian
Vaughan, Dr. Gerard


Kellett-Bowman, Mrs. Elaine
Powell, Rt. Hn. J. Enoch
Vickers, Dame Joan


Kershaw, Anthony
Price, David (Eastleigh)
Walder, David (Clitheroe)


Kimball, Marcus
Proudfoot, Wilfred
Walker-Smith, Rt. Kn. Sir Derek


King, Evelyn (Dorset, S.)
Pym, Rt. Hn. Francis
Walters, Dennis


King, Tom (Bridgwater)
Quennell, Miss J. M.
Ward, Dame Irene


Kinsey, J. R.
Ramsden, Rt. Hn. James
Weatherill, Bernard


Kirk, Peter
Rawlinson, Rt. Hn. Sir Peter
Wells, John (Maidstone)


Kitson, Timothy
Redmond, Robert
White, Rogert (Gravesend)


Knight, Mrs. Jill
Reed, Laurance (Bolton, E.)
Wilkinson, John


Knox, David
Rees-Davies, W. R.
Winterton, Nicholas


Lamont, Norman
Rhys Williams, Sir Brandon
Woodhouse, Hn. Christopher


Le Merchant, Spencer
Ridley, Hn. Nicholas
Woodnutt, Mark


Lewis, Kenneth (Rutland)
Rippon, Rt Hn. Geoffrey
Wylie, Rt. Hn. N. R.


Lloyd, Ian (P'tsm'th, Langstone)
Roberts, Michael (Cardiff, N.)
Younger, Hn. George


Loveridge, John
Roberts, Wyn (Conway)



McAdden, Sir Stephen
Rossi, Hugh (Hornsey)
TELLERS FOR THE NOES:


MacArthur, Ian
Russell Sir Ronald
Mr. Paul Hawkins and


McLaren, Martin
Sandys, Rt. Hn. D.
Mr. Marcus Fox.


McNair-Wilson, Michael
Scott, Nicholas



Madel, David
Scott-Hopkins, James



Marten, Neil

Question accordingly negatived.

Mr. Sheldon: I beg to move Amendment No. 39, in page 109, line 4, at end insert:
'7. Original works of art'.
We have had debates on different aspects of this Amendment on the Floor of the House, in Committee upstairs and on Schedule 5 in Committee upstairs, and each time we have dealt with it in a slightly different way. Amendment No. 39 represents the ideal Amendment. It covers original works of art comprehensively, it zero-rates them and adds nothing to them that might make the category less easy for the Government to concede. Amendment No. 39 is basically the right Amendment to enable the Government to show what they have in mind for the relief from taxation of the artist.
The Amendment seeks to zero-rate original works of art. If accepted, it will mean that living artists will have the

advantage of seeing their work carrying no tax throughout their lifetime. It would also mean that we shall put these works of art in the same position as books. There are those who hold the view, and I believe rightly, that works of art of this kind are in a similar position to books in that they spread knowledge and an understanding of the civilising process. Therefore, they should receive the same exceptional treatment as do books.

Mr. W. R. Rees-Davies: Is the hon. Gentleman talking only about works of art by riving artists, or about original works of art? An original work of art may be a work by Rembrandt or Turner, or it may be an original work of art by a living artist. What in fact does the hon. Gentleman mean by the phrase?

Mr. Sheldon: This was the ideal Amendment which we wanted to see introduced relating to original works of art by


a living artist, but we are prepared to see the provision spread a little more widely, we hope that at a subsequent stage the Chancellor of the Exchequer, before introducing this tax next April, will accept something on these lines.
We are seeking some assistance from the Government in this respect. We believe that an artist can be closely compared with an author. We believe that pictures by artists living today represent the product of the civilisation by which we wish our times to be remembered. If we are to offer any help to the artist, that help must be forthcoming from the Government—but not by way of grants.
It is extremely difficult to devise means of helping artists. Artists are not always very approachable and frequently shun the kind of institutions that are set up to assist them. They tend to be very naive and certainly they are not knowledgeable about financial matters. They need held and they deserve help, but it is difficult for the community to provide the help artists need.

Mr. Simon Wingfield Digby: Does the hon. Gentleman seek to include modern tapestries in the phrase "works of art"? There is quite a revival in modern tapestries, some of which are definitely works of art.

Mr. Sheldon: I am not prepared to specify any further. I am sure that that would be one of the categories which could usefully be included.
It is extremely difficult to help these people. Although the Arts Council receives large sums of money, the difficulty is in knowing how that money is to be dispersed to those artists who are most in need of it. We shall only find out in the course of time the artists who should have been helped and the other artists for whom help was not quite so necessary.
If we are not in a position to arrive at a proper judgment of the situation, then much of the money poured into helping the arts will be wastefully used. I make no complaint about this since it is an essential part of the process, but perhaps only part of the money will go to those artists whose work will be valuable in the context of time.
If it is difficult to apply money usefully in that way, what we should be

sure of is that under no circumstances should artists be taxed. If we cannot help them, let us not hinder them. If we cannot help them to create works of art in the way they wish, let us not put any barrier in their way. Surely the Chancellor of the Exchequer should do all in his power to assert the right of artists to conduct their operations free from the encumbrances of a tax of his own devising. It is one thing to have an anomaly of an existing tax which by force of circumstance unfortunately bears on the category one does not wish to tax, but it would be wrong to devise a tax which would have a bad effect on artists of our time when action can be taken to remove them from the ambit of tax. I cannot believe that the Government have such a course in mind. I am sure that over a period of time they will find some way of assisting these people to escape the burden of a tax which they have devised.

8.15 p.m.

Mr. Rees-Davies: I shall be very brief. I am afraid that confusion has been worse counfounded by this Amendment. It is designed and intended to assist the living artist. It does not make plain the range of works of art covered. Is it only the painter, or does it include the printer, the lithographer, and the tapestry maker? Does it include the potter? How wide a coverage does the hon. Member for Ashton-under-Lyne (Mr. Sheldon) envisage by the term "work of art"? Who will derive benefit from the Amendment? If it be only living artists, why is there no reference to the fact that the first £5,000 will not be subject to VAT anyway? If that be so, it will be only the better-off artist who sells a substantial amount of his work who will be subject to tax.
I hope that my hon. Friend will be able to say something about the situation in France. As I understand it, specific exemption from VAT is given to living artists in France and I have considerable sympathy with that view. It seems to me that the problems of the living artist are totally separate from the problems involved in other works of art, but if we can do something to help living artists in a narrow way, such as painters and those who paint water colours, then I feel we might reasonably do something for them.

Mr. Sheldon: The lion. Gentleman does not seem to realise that this point was covered in the debates in Standing Committee where an Amendment of this kind was resisted by the Government.

Mr. Rees-Davies: That may be so, but the hon. Gentleman made the point that he was seeking to assist the living artist and not to cover original works of art by those who are dead. Therefore, if the Amendment is accepted, it would surely go very much wider than the hon. Gentleman claims. It is important not to mislead artists throughout the country. A painter is not the only person who regards himself as an artist. Would a very fine piece of jewelry design qualify as a work of art? I do not know. It would have to be carefully designed.
Picasso creates not merely paintings but pots and plates which are great works of art. Are they to be treated as exempt? Is a magnificent original design to be exempt when it is reproduced in copies thereafter?
These are all difficult problems, but the civilisation of France can probably give us a guide. I am sure that the Treasury has examined the French precedent. I understand that in France there is a partial exemption for a limited class of living artists, and I should like to hear the Financial Secretary's views on it. I am opposed to the Amendment as it stands.

Mr. Hugh Jenkins: The hon. Member for the Isle of Thanet (Mr. Rees-Davies) is opposed to the Amendment because of its catholic wording. If the hon. Gentleman does not like the wording which my hon. Friend the Member for Ashon-under-Lyne (Mr. Sheldon) has so effectively expounded, I am sure that my hon. Friend will say that if the hon. Gentleman accepts the principle he will be prepared to leave the final wording to the Government and will not press the point. If the Government wish to introduce a narrower form of wording with a more precise definition, they should have no difficulty. The drawing of lines should present the Treasury with no problems. The French can draw lines. However, in this case the hon. Gentleman seems to have some trouble in drawing a line. In an earlier debate he explained how difficult it was to draw lines and how if one moved a little bit one way

one would be on a slippery slope and treading on all sorts of other problems.
They have no such trouble in France. The French Government even make different rates of tax. The very thought of that here casts the Government into great confusion. The French exclude amateur productions and educational productions, for example. All these things are possible in the Six. Why not in this country? I agree with the hon. Member for the Isle of Thanet that what constitutes a work of art is a very wide area. Every play and poem which has ever been written is a work of art, at least in the estimation of the author. I agree that this is a wide definition but that is nothing against the Amendment; indeed, it speaks in its favour.
Surely the Government do not wish to define "work of art" so closely as to exclude many things which other people think of as works of art? No doubt, if the Government accept the Amendment, they will wish to be generous and to have a wider definition of what constitutes a work of art.
I was at a loss to understand why it was that Mr. Speaker failed to select Amendment No. 40, which sought to include the words
plays, printed, duplicated, manuscript or performed".
It merely sought in effect to add the word "performed" to what is already agreed to be properly excluded—that is to say, to plays printed, duplicated or manuscript, which are already zero-rated. I was astonished that it was not selected, but I now see the reason.

Mr. Rees-Davies: On a point of order, Mr. Deputy Speaker. Perhaps the Chair has been slightly indulgent. The hon. Gentleman is now on Amendment No. 40, which has not been selected by the Chair. The hon. Gentleman cannot include manuscript plays as being original works of art. There are many other matters to be debated, and I invite the Chair to call the hon. Gentleman within the terms of order in this matter.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): I shall not define a work of art, but I hope that the hon. Member for Putney (Mr. Hugh Jenkins) will not go too far outside the terms of Amendment No. 39. The hon. Gentleman knows


that Mr. Speaker has ruled Amendment No. 40 out of order. I took it that he was making a passing reference to it. I hope that he will now proceed.

Mr. Jenkins: You are entirely correct in your interpretation of what I was about, Mr. Deputy Speaker. It follows from that that the hon. Member for the Isle of Thanet must be hopelessly in error, as, indeed, is normally the case. You are quite correct, I was referring to Amendment No. 40 as a preliminary to saying that when I realised the wide interpretation which can be put on, "Original works of art", I realised that Mr. Speaker had, in excluding Amendment No. 40, considered that I could make my speech on this Amendment because a play performed can be a work of art. Therefore, it is possible for one to refer to plays. Whether "Oh Calcutta" is more or less a work of art than "Othello" is a matter which no doubt could be debated at great length, if we had time to do so, with great profit and interest to us all. That one or both are works of art cannot be doubted. I hope that my hon. Friend the Member for Ashton-under-Lyne will not object if I stretch his interpretation of an original work of art in this way.
I hope that the Minister will say that on reflection he would like to re-appraise the Government's attitude to the arts. There may be another opportunity for him to do so tomorrow, so he has time to consider the matter. If he gives some indication to my hon. Friend that there has been a change of heart and that the Government are seriously concerned about taxation of the arts, I hope we will not press the Amendment to a Division. However, if there is no such evidence no doubt my hon. Friend will press the matter.
When one considers the large number of my hon. Friends who have added their names to Amendments which seek to secure the zero-rating of the theatre, and that hon. Members of the Liberal Party, who are unfortunately absent at the moment, put down an Amendment to the same effect, one sees that there has been since the Committee stage a swing towards the feeling that the arts should be zero-rated, not least among supporters of the Government. The whole area of the arts is unsuitable for taxation in any

shape or form, so I hope that we shall hear something encouraging, something of a civilised character, for the first time from the Minister. Do not let him fob us off about the difficulty of drawing lines. The Minister is in the business of drawing lines and if he cannot do so for the purpose of excluding the arts from taxation, then he does not deserve to be sitting where he is.

8.30 p.m.

Mr. Dalyell: I propose to be constructive. I can tell Treasury Ministers where they can get the money needed for the Amendment. They can get it by not spending considerable sums of public money in helping the National Gallery to retain pictures such as Titian's "Death of Actæon"in this country. [Interruption.] I do not concede here that I am a philistine. I have as great an interest in pictures as any other hon. Member.

Mr. Rees-Davies: I was merely repeating what I said earlier. How Titian comes into this argument confounds almost everyone.

Mr. Dalyell: I congratulate the hon. Member on being the new Deputy Speaker. I will take my orders from you, Mr. Deputy Speaker, and not from him. There is a real issue here. However much we love Titians, they are not part of our culture, and if the National Gallery wants to sell these pictures to Maribou, California, where undoubtedly they will be well looked after, this may well have a rationale about it.
If considerable sums of public money are to be used, it is much more important that they be used for encouraging living artists, rather than for keeping Tintoretto's or any of the other great artists' works in this country. What kind of discussion has gone on as to what the balance of priority ought to be? I hope that there has been some discussion in the Treasury about to what extent we should use public funds for helping living artists as opposed to retaining pictures, however famous, and using vast sums of public money to do so.
The balance as far as I am concerned comes down very strongly in favour of helping the living artist and for that matter, of course, preserving some of our own heritage. Titian and the like


are international. They are the heritage of the world. I see no over-riding reason why we should spend considerable sums of public money to keep these pictures here. We would do better to use the money to enable the Treasury to accept an Amendment such as this.

Mr. Andrew Faulds: I had not intended to make any observations but I must do so in view of what has just been said by my hon. Friend the Member for West Lothian (Mr. Dalyell). I think that he is treading dangerous ground here. It is surely not a question of zero-rating for the theatre or the retention of international masterpieces in this country. It surely should be for the Treasury, for the preservation of our enormously varied cultural activities, with their great contribution to the national life, to make it possible for both things to be done. We should have both the retention of international masterpieces in this country, which I do not want to see sent to Maribou or anywhere else, the zero-rating for this extraordinarily valuable part of our cultural life, the theatre, not only in terms of its contribution to the lives of us all, but in terms of things such as the export trade, which surely the Treasury should appreciate. I would not like the House, and certainly not the Treasury, to think that all of us endorse the comments of my hon. Friend the Member for West Lothian.

Mr. Higgins: There has been some discussion in the debate as to what is or is not a work of art. I think that most of us feel that the hon. Member for Putney (Mr. Hugh Jenkins) produced something of a work of art in getting into order his concern about the live theatre, which is well known to us all.
I was a little worried when the hon. Member for Ashton-under-Lyne (Mr. Sheldon) said that we had discussed works of art in each forum for this Bill, because we discussed it on the Floor of the House in Committee and also upstairs in Standing Committee. I suppose that he would now describe the discussion on the Report stage as the "Flora forum".
Two serious points have been raised on this matter, one of them in the House in Committee and one upstairs. The first referred to the question of our international art market and the other related to the works of living artists. While I

cannot go along with the hon. Member for Ashton-under-Lyne in thinking that this is an ideal Amendment, it is true that it comprehends both questions, so I shall deal with both.
First, I will deal with the question of the works of living artists or, as the Amendment calls them, "Original works of art"—or artists' sale of their own work. That was one of the most enjoyable, as well as one of the deepest, debates we had in Committee. We went at great depth into the position of the living artist. The Committee reached a decision on that issue.
My hon. Friend asked about the position in France, where there is a system of exemption for works by living artists. It is important to notice that the small-trader exemption in France is a great deal lower than that which we are proposing in this Bill. We would not wish to go to a very complex system of VAT with multiple rates and exemptions of the kind existing in France. We believe that there is a strong case for a single low rate.
The £5,000 exemption is of considerable importance to the living artist when beginning his career. Once he gets beyond that point he may well prefer to deduct his input tax on some of his materials. We discussed figures said to relate to a particular sculptor and how much he paid for rent although his taxable turnover was less than £5,000. The Committee doubted whether such a sculptor existed and whether he paid that rent with such a taxable turnover. The £5,000 exemption will be of help.
We cannot accept what the hon. Member for Ashton-under-Lyme says, that we must give relief to this group by relieving them of VAT rather than through the system of grants. It would not be right for me to pursue that point. It is not right that we should rate the artists' sale of their own work in the way suggested. This is a comprehensive tax. This set of products and producers should fall within its scope. That is the basic line we have taken throughout our debates.
The subject of existing works of art, in particular on the London market, was debated in the House. My right hon. Friend pointed out the considerable disadvantages which might arise from the fact that works of art might flow over


the course of a long or indefinite time from taxable to non-taxable traders, with a partial cascade effect, where tax would accumulate. The suggestion was made that the answer was to make some provision whereby the works of art in the London market might be taxed not on their full value but on the margin, by the operation of a scheme of a kind covered in the provisions of the Bill, providing an order is made.
Following the statement made by my right hon. Friend in Committee on 11th May, at column 1596 of the OFFICIAL REPORT, to the effect that I had asked the Department of Customs and Excise to have further urgent discussions with the trade to ascertain whether it is possible to find a way round this problem, a series of discussions has taken place with the various interests involved to see whether a satisfactory scheme could be produced to protect the position of the London art market, which is important with regard to invisible earnings. The primary purpose of that scheme would be to avoid the accumulation of tax which would occur in circumstances to which I have referred.
The Department of Customs and Excise had a number of meetings with the trade. A satisfactory scheme can be devised, under which dealers would need to record each purchase of goods within the scope of the scheme and to maintain a stock-book with each item being allocated a unique reference which would remain with the article while in stock. The difference between the dealers' buying and selling prices would be regarded as tax inclusive. The dealer would account for the tax on the basis of that difference. Any cost incurred by the dealer while the work was in stock, for example on cleaning, would not be taken into account in determining the margin.
To avoid disclosure of the margin—a point on which dealers laid great stress—no tax invoices would be issued even in respect of dealer-to-dealer sales. It follows that the purchasing dealer would not be able to claim any deductible input tax in respect of the purchase of the work of art. Those are the broad details of the scheme.
One of the major problems thrown up in the course of discussions was the treatment of imports of secondhand works of

art. The dealers' working party made it clear that this was all important, because they felt that without free movement of imports the position of London as a major international centre of the secondhand market would be in jeopardy. This is a point which arises on a later Amendment.
The proposal as it was originally examined would have produced some discrimination against United Kingdom artists, because a new United Kingdom work of art would be taxed on the full value on first sale after 1st April, 1973, whereas a foreign work of art executed after 1st April, 1973, would never attract United Kingdom VAT on the full value unless it was imported as a new work of art before its first sale.
This potential discrimination would be resolved if relief for imports were restricted to works in existence on 1st April, 1973, while all works executed after 1st April, 1973, whether new or secondhand, were liable at import to VAT on the full value. This is the treatment for imports which would remove the discrimination which would otherwise have been involved between the British artists and the foreign artists selling in this country.
The coverage of the scheme is not finally settled, but it will be based on Chapter 99 of the Customs and Excise Tariff and will cover essentially paintings, engravings, sculptures and antiques over 100 years old.
The position of the United Kingdom artist and the position of the London art market arose on the Amendment. We believe that this arrangement will be acceptable to the trade. Final details must be settled before a Treasury order can be made. I believe that a satisfactory arrangement can be made and I hope that it will meet with the approval of the House.

Mr. Rees-Davies: Does the question of the auction house in the London art market arise at this point or later? Questions were raised earlier about the amount chargeable on the auction of works of art, whether it should be 1 per cent. The question is whether the amount should be based on the commission charged by the auctioneer or on the value of the work of art as a whole. Has my hon. Friend arrived at any conclusions?

Mr. Higgins: I have thought it right to outline the scheme, although discussions are still continuing on some of the technicalities. In due course an order will be made, when the matter can be discussed and the House can reach a decision.
A dealer's margin is the realised auction price less the dealer's purchase price. This margin would then be regarded as tax inclusive and the dealer would eventually account for one-eleventh of the margin as VAT, unless the work of art were exported, in which case the zero rate would apply.
8.45 p.m.
sAuctioneers' service charges—in other words, their commission—are separately liable to VAT. But this sum would be a deductible input tax to the dealer. I think that that answers my hon. Friend's query. It is quite a complex and technical matter, and it has taken a good deal of discussion to arrive at a satisfactory solution. It will still be the case that VAT will apply but under the terms of the Clause, providing that the House agrees to the order, with regard to the special provisions made for certain second-hand goods. There are other items which will be covered by orders in this respect and on which representations have been made.
That is the broad picture. We thought it right to outline the present state of play in this respect. We recognise the importance of the London art market and, that being so, we believe that this is a satisfactory, workable and practicable scheme.
I have sought to cover both the main areas covered by the Amendment, works of the living artist and those of the London art market. For the reasons that I deployed at greater length in Committee I cannot recommend the acceptance of the Amendment with regard to the living artist. With regard to the London art market, I think that we have gone a long way to meet the points which were made in Committee.

Mr. Dalyell: Has any reflection taken place in the Treasury on the issue that I raised, namely, the distribution of public funds three ways as between the living artist, our own heritage and famous international pictures?

Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. I do not think that we can talk about expenditure when we are concerned with exemptions from the tax.

Mr. Robert Cooke: I am grateful for what my hon. Friend the Financial Secretary said. It is fair to say, however, that one would have to be an expert in these matters to be able to appreciate the finer points contained in his remarks.
I believe that it would be right to use a slight different phrase for the art market. I prefer to describe it as the international market based on London, which is what we have been trying to preserve. We hold the international market for a great many sides of art here in London and we are determined to keep it.
As a result of what my hon. Friend said, assuming that the later Amendment is made and that the order is approved—and I cannot conceive of circumstances in which the House would wish to do other than approve it—there will be no disincentive for anyone wanting to use the international market based on London to sell goods which he has brought in, say, from America, tax free. In other words he can sell them here tax free and take away the proceeds. There remains no impediment for a person who wishes to avail himself of the services of London to continue to do so whatever domestic tax or taxes this House may decide to approve for the benefit or otherwise of British subjects here in Britain.

Mr. Sheldon: The concession that the Financial Secretary has made is ingenious and one of the most thorough that we appear to have received. For that, the Opposition must thank the hon. Gentleman. However, it does not cover the position of the artist selling his own work. Over the next few months, before the introduction of the tax, I hope that further thought will be given to this point with a view to producing a fully rounded concession of a type which would meet the wishes of the House.
What I am pleased about—and I think the whole House must express its appreciation of this—is the way he has worked out in a very complex form, and obviously as the result of a great number of detailed negotiations, a solution to the problem of maintaining the position of the London


art market and enabling it to continue to play its important role, not only for art but also for our own economic position. We must express the full gratitude of the House for this concession and, with your permission, Mr. Deputy Speaker, and that of the House, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Higgins: I beg to move Amendment No. 41, in page 109, line 6, at end insert:

'GROUP 3A—TALKING BOOKS FOR THE BLIND

Item No.

1. The supply to the Royal National Institute for the Blind of—

(a) magnetic tape specially adapted for the recording and reproduction of speech for the blind;
(b) tape recorders designed for the reproduction of sound from such tape;
(c) parts and accessories for goods comprised in paragraphs (a) and (b) above'.

This Amendment arises from a discussion which took place on the Floor of the House in Committee with regard to the position of talking books for the blind. It is, of course, the intention in the Bill that these books should be relieved of the tax, and the Amendment which we are proposing would in fact relieve talking books for the blind by including them in Schedule 4. The effect is to zero-rate the supply to the Royal National Institute for the Blind of specially designed talking book machines used by the blind to play back recordings of books, newspapers, and so on, on magnetic tape, and the tapes, parts and accessories for these machines.

I do not think there is any hon. Member, whether present or not, who does not feel great sympathy for those who are blind. It is also widely recognised that the talking books which are provided by the Royal National Institute for the Blind provide a very valuable—indeed some would say an invaluable—service.

The points which were made in Committee were such that I thought it right on that occasion to say that I would bear them in mind and consider them very carefully before Report. As a result of that consideration, we believe that it would be right to make this amendment. On some of the other Amendments it has

been pointed out, by myself among others, that there would be a danger that this might open up scope for pressure in respect of, as we were saying a moment or two ago, apparatus for reading microfilm or whatever kind of apparatus it might be. I am absolutely convinced that that is not the case in this instance. I had not previously seen these talking books and the apparatus connected with them, but now I have examined them and I think the machine is clearly distinguishable from any normal tape recorder.

Therefore I hope the House will feel it right, as I have no doubt it will, to accept Amendment No. 41. The Opposition also has an Amendment on the Order Paper. I cannot recommend the House to accept that, but I hope that all hon. Members will join in accepting Amendment No. 41.

Dr. Gilbert: May I say straight away to the hon. Gentleman that on this side of the House we find the Amendment most welcome. I for one would like to acknowledge unreservedly that it removes the rather unfortunate taste that was left by the niggardly Treasury attitude last night to Amendments by my hon. Friend the Member for Willesden, West (Mr. Pavitt) and the hon. Lady the Member for Plymouth, Devonport (Dame Joan Vickers).
As the hon. Gentleman has distinguished between our Amendment No. 72 and his own Amendment No. 41, it might be helpful to clarify the superficial differences between the two. Amendment No. 72 specifies that zero-rating should be available for sound records on magnetic tape or other recording material, whereas the Government Amendment confines the concession to records on magnetic tape. It is clearly more restrictive than the Opposition Amendment. I gather, however, that this is probably not too serious a restriction, subject to what I am about to say.
I understand that whereas the Royal National Institute for the Blind until a few years ago made use of gramophone records for the purposes outlined in the two Amendments, that is no longer so. I understand that the only people who are using record discs for this purpose are the United States Library of Congress. Therefore, it appears that we are well in the forefront of technological developments.
What worries me slightly about Amendment No. 41 is that it fails not so much to look backwards to types of equipment that were in use until recently but to encompass the possibility of new methods of sound and voice reproduction being invented in future.
It will be recalled that earlier this afternoon on a different set of Amendments the Chancellor of the Exchequer was most adamant about the necessity of reserving to himself the freedom of manoeuvre—I think he was talking about new marketing technologies of all things; that was the general thrust of his remarks—in connection with foodstuffs. All I ask is that the Financial Secretary should give us an assurance tonight that he will retain for the Treasury the same freedom of manoeuvre in this sphere in future.
There is a second distinction between the two Amendments. The Government's Amendment confines zero-rating to supply to the Royal National Institute for the Blind. This constraint is not incorporated in our Amendment. We resisted this type of constraint, by type of supplier, in Committee, first, in connection with hearing aids—though casting my eye further down the Notice Paper I gather that we are to have a welcome concession in that direction before too long—and, secondly, in connection with the supply of pharma-ceuticals, which we shall debate later.
I am satisfied that the monopoly status that the Government's Amendment accords to the Royal National Institute for the Blind is in no way harmful to the public interest. First, I understand that it has exclusive arrangements for purchase of these machines mainly for the purpose of copyright protection. Had it not had that sort of monopoly arrangement it would not have been possible for it to make so many records available to the blind.
Secondly, and probably more important, one does not have to be a registered blind person to avail oneself of the RNIB scheme. A registered blind person gets it automatically; but, in addition, anyone who can obtain the appropriate certificate from a consultant ophthalmic surgeon can avail himself of the scheme. I understand that many of the 34,000 RNIB machines go to people not on the register. I trust that this welcome concession will lead to an even wider use

of these most helpful machines and the materials that go with them.
Subject to the qualification which I made earlier, and on which I hope we shall have some reassurance from the Financial Secretary tonight, we unreservedly welcome the Amendment.

Amendment agreed to.

9.0 p.m.

Mr. David Madel: I beg to move Amendment No. 170, in page 109, line 9, leave out 'or periodical' and insert 'periodical or directory'.
The object of the Amendment is to zero-rate the directory publishing operation in the same way as the publishing operation of books, magazines and periodicals has been zero-rated. May I straight away declare that I have an interest in publishing.
Telephone directories are apparently not considered as periodicals since they are only published annually, yet they contain editorial content in so far as they set out a considerable amount of information and data for use by the public. This data is included free of charge to telephone subscribers, a charge being made only for the advertising space purchased in the directories.
There appears to be no logic in discriminating against telephone directories compared with many other publications which carry added editorial matter of a similar nature. Although I am saying something about telephone directories, should my hon. Friend the Member for Hendon, North (Mr. Gorst) come into the Chamber and be enabled to take part in the debate he may wish to extend the zero-rating principle right across the board of publishing as well as to the whole question of telephone directories.
The point about the advertisers in telephone directories is that many of them are small traders, such as plumbers, electricians and carpenters. Under the VAT proposals many of them with a turnover of less than £5,000 will be exempt and will be unable to pass on the VAT liability to their customers. The effect will be that the cost to them if they advertise in the directory will be more onerous than for their competitors.
Many of these people may also advertise in the local newspaper in their area.
That, we are told under this part of the Bill, will be zero-rated in newspapers, magazines and periodicals. Thus, one section of the publishing industry, namely, the telephone directory section, is being discriminated against. It appears to be an anomaly which may have been overlooked due to the fact that directories are not considered to be periodicals.
The small businessman—the electrician or the plumber—will be caught in two ways. He will be caught by the fact that he is exempt from VAT because his turnover is less than£5,000 a year, and as the Bill stands he will be caught by the fact that advertising in directories will not be zero-rated.
The prime competition for advertising—and it is a competitive field—by the directory publisher comes from the local or regional newspaper. If advertising in local newspapers is zero-rated directories will be put at an unfair disadvantage. This is an anomaly. The Bill is generous to publishing. It has been said that there is to be no tax on knowledge. We know that advertising subsidies the cost of newspapers. If advertising in newspapers were not zero-rated there would be a sharp rise in the sale price of newspapers. Nevertheless, the Government have said that the newspapers provide information, which could be held to be providing knowledge, and therefore advertising in newspapers will be zero-rated.
It is a fine line between information in a directory and information in what I class as certain other periodicals. If the Government had said that they would allow only advertising in newspapers to be zero-rated and nothing else would do—no periodical, magazine or quarterly—one could accept that, but they have gone further and said that advertising will be zero-rated in newspapers, magazines and periodicals.
My case is that a telephone directory ought to be regarded as a periodical. I hope very much that the Minister will be able to see this slight anomaly in the publishing world and will put it to rights, so that the publishing industry as a unit is fairly treated across the board.

Mr. John Gorst: I shall be brief because the House wants to make progress.
On this group of Amendments, I should like to persuade the Minister to explain how it is that the zero-rating of newspapers, periodicals and such like media can be justified whilst all other advertising media, such as posters, radio or television broadcasting and point-of-sale material, and any other advertising media, is not to be zero-rated. There is a very good case for zero-rating newspapers. But if there is a case to be made for such media, it ought to be for all media and not just selectively for certain types of media.
I ask the Minister to give an explanation on that point, and I hope that he will be able to satisfy us.

Dr. Gilbert: I should like briefly to make it clear that the two Amendments do not have the support of the Opposition. I do not suppose that that comes as a great surprise to the hon. Member for Hendon, North (Mr. Gorst), but I am sorry to have to disappoint the hon. Member for Bedfordshire, South (Mr. Madel), who spoke most eloquently in his cause.
It would certainly not be our view that it is illogical or against the public interest to discriminate between newspapers, on the one hand, and point-of-sale material and posters, as one part of the other media, or radio or television advertising, on the other hand.
We are all aware of the economic difficulties of the newspaper industry. I am not aware of any particular difficulties facing commercial television or radio. The arguments about point-of-sale and poster advertising have no great merit. We see no reason why they should benefit in the same way as the others.

Mr. Gorst: Is the hon. Gentleman aware that it was reported in The Times yesterday that newspaper sales earned 15 per cent. more, according to the latest figures available, compared with 1970?

Dr. Gilbert: I am very glad to hear that they are 15 per cent. more. I did not have that statistic at my fingertips, but certainly the volume of sales is not the only index of economic health, as I am sure the hon. Gentleman would agree. It is common ground on both sides of the House that the newspaper industry, at both national and local levels, is in serious economic straits, with a few exceptions,


and anything which could be done to assist it through relieving it of unnecessary tax is something that the Opposition would welcome.
I cannot see that the social advantage that can be adduced in favour of the newspaper industry can necessarily be adduced in favour of the other types of media favoured by the hon. Gentleman. We shall clearly differ about that.
Without prolonging the argument, I merely wish to make our attitude clear about it. Regarding the point made by the hon. Member for Bedfordshire, South, about directories and small traders being exempt, the small trader with a turnover of less than £5,000 a year is likely to be so small that it is most unlikely that he will be able to afford to advertise. I am sure that the hon. Gentleman would agree on that point. There cannot be many small traders in his constituency grossing under £100 a week and staying in business on a scale that would enable them to advertise. If the effect of not carrying these Amendments were to direct any of their advertising money towards the local Press rather than towards telephone directories, again a very useful social purpose would have been served.
Telephone directories are just another way of minting money and I find significant the enthusiasm with which the Thomson Organisation, which knows a good thing economically when it is on to it, has rushed into the yellow pages business in telephone directories in this country. The Opposition find no immediate sympathy for any suggestion that those who are responsible for organising yellow pages advertising in the telephone directories are in any need of preferential treatment through the tax system of the sort suggested by the Amendment. I hope, therefore, that the Chief Secretary will resist the Amendment.

The Chief Secretary of the Treasury (Mr. Patrick Jenkin): Fortunately I shall not have to follow the hon. Member for Dudley (Dr. Gilbert) on his excursion into the relative moral values of different forms of advertising.

Dr. Gilbert: I did not say moral values.

Mr. Jenkin: It does not matter whether they are moral or social values, because one of the great advantages of VAT is that as a fiscal machine it is as neutral as

we can make it in this respect. It is not a tax which is intended to draw distinctions of that sort between the different categories of goods and services on which it impacts.

Dr. Gilbert: What on earth was the purpose of the last Amendment, if it was not precisely that?

Mr. Jenkin: That was simply a question of whether hardship might be caused to particular categories. It was not the sort of distinction which the hon. Member was seeking to draw in the earlier part of his remarks. It is important to get clear that we are dealing here with Group 4 of Schedule 4, which has the effect of zero-rating advertising in journals, periodicals and newspapers. Group 3 has the effect of zero-rating the sales of books, brochures and so forth. Item 2 deals with newspapers, journals and periodicals and Item 3 with children's picture books, painting books and so on.
We are referring here to advertising in some of these periodicals. We regard directories as falling within Item 1 of Group 3 and not Item 2 which includes newspapers, journals and periodicals. They are properly classified with books, brochures, pamphlets and leaflets, rather than with journals and periodicals. Perhaps I should explain this by giving the definition of journals and periodicals on which it is intended to base the operation of this part of the value added tax.
The heading is intended to cover journals and periodicals issued weekly, fortnightly, monthly, quarterly, half-yearly or annually, either in the form of newspapers or as paper-bound publications. They may be mainly devoted to the publication of intelligence on subjects of a specialised nature or sectional interest—for instance, legal, medical, financial, commercial, fashion or sporting, or any one of the wide range of interests or be of a general interest, such as ordinary fiction magazines and consist of a miscellany of critical and descriptive articles, essays, works of fiction and so on, with the content matter changed for each edition.
That definition of journals and periodicals is hardly apt to cover directories. That is why we regard directories as coming within Item No. 1 of Group 3, and not Item 2, and why advertising in directories is not intended to be included


in the zero-rating in Group 4 of the Schedule, which is confined to publications in newspapers, journals or periodicals.
9.15 p.m.
The first question is why we have thought it right to make the distinction for newspapers, journals and periodicals, so that those who advertise in them can do so free of tax. The short answer is not to be found in any of the social reasons advanced by the hon. Member for Dudley. First, the newspapers are in a parlous state. Secondly, and perhaps most important, a far higher proportion of newspaper advertising is done by private individuals who cannot roll the tax forward onto anybody else, and who therefore would have to bear it, whereas almost all the other forms of advertising to which my hon. Friend the Member for Hendon, North (Mr. Gorst) referred—the posters, television, the point of sale and all the rest—are overwhelmingly carried out by taxable traders. Therefore, the value added tax imposed on the charges to them will be regarded through the ordinary operation of the credit mechanism as an input tax in their hands. That is not the case with newspapers. The newspapers, which made representations after the publication of the Green Paper, feared that unless their advertising were zero-rated they would lose out very heavily to the other forms of advertising which are open to the individual on whose advertisements in newspapers, particularly local newspapers, the Press is so dependent.
We come to the next question, posed by my hon. Friend the Member for Bedfordshire, South (Mr. Madel): "Why has this not been extended to directories? Why should not advertising in them be zero-rated?" First, it has nothing to do with the fact that they may be published annually, because the definition I have already given of what we regard as a journal or periodical includes one which may be published only annually. The first reason why they can be distinguished from newspapers, is that they are not in a parlous financial state. There is no suggestion that those who publish directories are having a difficult time to make ends meet and make the businesses pay their way. On the contrary, they are a very flourishing form of publica-

tion. It would be wrong, therefore, to single them out for any specially favourable treatment on the grounds of their economic viability Secondly, those who advertise in directories will be overwhelmingly taxable traders, and any tax charged to them on the cost of advertising will be input tax in their hands. For those reasons, we thought it entirely right that they should be classified with the rest of the advertising media and not singled out for inclusion with the newspapers, journals and periodicals.

Mr. Gorst: Does it follow that, for example, those trade journals which are in a profitable position, and into which goes advertising which is probably entirely of the sort that is not from consumer advertisers, are liable, therefore, at a future date to be thought of in a different sense from that in which the Government are now thinking of them?

Mr. Jenkin: I should not like my hon. Friend to draw that conclusion. The problem here is the same as it has always been when my hon. Friend the Financial Secretary has carried the burden of steering the tax through Committee and through the Report stage so far. He has constantly had to say that whenever we make exceptions of this sort we face the difficulty of trying to find a defensible line. I see my hon. Friend's point. Some of the trade journals are prosperous businesses and might well have been included with the rest of advertising, but it seemed to us to be right to draw the line so as to include in the zero-rating not only newspapers but also journals and periodicals. This is a fairly reasonably defined category on the basis of the definition I have given to the House.
My hon. Friend the Member for Bedfordshire, South made a point which it is right I should answer, because it is clearly one that is worrying the proprietors of the directories. It is the fear that they will be put at a disadvantage—particularly with the small trader who may be exempt and may not be able to treat the tax as input tax and claim credit for it—vis à vis the local newspapers. I have looked into this because it seems to be a point of some importance and as a result of the limited researches I have done I have come to the conclusion that the anxieties expressed are ill-founded. Advertising on any regular


basis in directories as compared with local newspapers is likely to be considerably less expensive, even if the VAT has to be added to the charge for advertising in directories.
If we take the "Yellow Pages", mentioned by the hon. Member for Dudley, its charges are explained in the front. There is one free entry in ordinary type for each business rate subscriber in the London Telecommunications Region, with the exception of barristers. I am not sure why barristers should be excluded but they always are rather singular. The free entry is allowed in respect of each main line or group of main lines. There can be additional entries for which additional charges are made. The extra light-face entry is £29 per annum, the bold-face entry £35 per annum and the one inch listing £70 per annum, going right the way up to a full page for £1,456 per annum.
An analysis was carried out to find out who were the advertisers in "Yellow Pages" and where the bulk of their advertising was placed. It was found that three-quarters was placed on those first three categories of entry, extra light-face entry, bold-face entry and the one inch listing and that 56 per cent. of the entries were of the one inch listing, that is more than half the total of the survey. The Central London rate for that is £70.
If we take a local newspaper, I have taken one circulating in my constituency the Stratford and Newham Express, we find that a classified advertisement booked for a year is paid for on the basis of 37 weeks with a discount for the rest. A plumber or electrician in a small way of business, instead of paying the £70 for the "Yellow Pages" entry, would pay £120 to £125 for one column inch in the Stratford Express for a full year.
I know that that is only one example, but it is the example of where most of the advertising goes in "Yellow Pages" and I would argue from that, even with the 10 per cent. VAT raising the charge to £77, there is still a handsome margin of advantage to "Yellow Pages" as against the local Press. I feel that that part of my hon. Friend's argument, advanced in all sincerity, can be shown to be not well-founded. The fears expressed are not justified.
In short, I do not believe that there is an anomaly here. The exclusion of directories from Group 4 is entirely logical. It accords with the logic of what is in Group 4 and no hardship, discrimination or unfair distortion will arise as a result of that. I hope, in these circumstances, that my hon. Friend may feel that he does not want to press his Amendment.

Mr. Madel: I am grateful to the Minister for his full reply. I am not able to accept his argument in totality, but nevertheless, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Sydney Chapman: I beg to move Amndment No. 47, in page 109, line 38, leave out from first 'services' to end of line 40.

Mr. Speaker: It will be for the convenience of the House to discuss also Amendment No. 76, in page 112, line 34,
at end insert:

'GROUP 14—FEES IN CONNECTION WITH HOUSING. &C.

Item No.

1. Fees of architects and quantity surveyors and civil engineers and legal fees incurred in connection with building operations and conveyancing of property'.

Mr. Chapman: It may be helpful if I say that we are discussing those services and items that should be zero-rated, and my Amendment refers specifically to Group 7—"Construction of Buildings, Etc.", Item No. 2:
The supply, in the course of the construction, alteration or demolition of any building or of any civil engineering work, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity.
It is appropriate for me to declare a personal and professional interest, as I am an architect, surveyor and town planning consultant. Speaking personally, I much favour VAT to the exclusion of what I consider to be the arbitrary purchase tax and SET. I recognise only too well that the advantages of VAT depend upon its net being as widespread as possible so that the rate can be as low as possible, with the obvious necessary exemptions.
I am grateful to you, Mr. Speaker, for calling the Amendment, as a similar Amendment was not selected in Committee. My right hon. Friend proposes to


zero-rate new construction work, not, incidentally, maintenance or repair work, but that can be the subject of another argument and another Amendment. There is a specific exclusion, which I have just read out, not to zero-rate the architect, surveyor or person acting as a consultant or in an advisory capacity. In itself, I feel that is all right; there is no reason why an architect, a surveyor or any other person acting as a consultant should have a prior claim over other and perhaps more worth while claimants. However unfair this proposal may seem to designers and consultants working within the construction industry, it is at least logical. That is to say, it would be logical if it meant all designers and all consultants within the construction industry, but the sad fact remains that it does not.
Design and consultancy services within and part of a construction industry will be zero-rated. To give an example, if any of the leading construction firms have architectural groups working within the firm, as they do, those services are zero-rated. On the other hand, services provided by what I can best describe as independent professionals, where clients go to voluntary consultants outside any construction organisation, are to be subject to VAT, presumably at 10 per cent. I think I can claim support from both sides of the House in saying that that is irrational and unfair.
While it may be true that some clients will not be adversely affected financially, most or many of them will be. It is obvious that local authorities will be able to recoup the tax, and some businesses may have the tax allowable as an input, but for a significant proportion of clients the tax can be avoided only by not employing independent professional services. This significant proportion will include exempt businesses and individual householders.
Examples of exempt businesses are the insurance companies and property developers, which are sponsors of large-scale construction work. These exempt businesses under Schedule 5 of the Bill cannot claim back VAT on their inputs. Incidentally, hospital boards, universities and housing associations which generate important construction work presumably would fall within this category.
9.30 p.m.
The Royal Institute of British Architects, to whose Council I recently had the honour to be elected, estimates that 20 per cent. of all building work falls into this category. It is no exaggeration to say that this significant part of the building work will be less likely to be undertaken by architects, engineers and surveyors and this will put the quality of design in jeopardy. It can be said that we are living in an age when the environment is one of the foremost political issues. Therefore, it is a little peculiar that the Government should seek to propose a fiscal measure which can have only an adverse effect on the quality of the environment.
The second example I want to give is an important and human one and relates to the individual who wishes to build a new house or to improve an existing one. He or she will find the extra cost of VAT a positive disincentive to employing an architect or quantity surveyor or some other private consultant. Again, those clients will be less likely to employ their services.
It may be argued by my hon. Friend that a way round this difficulty is for the builder to employ the architect to undertake this work, but I believe that this would defeat the vitally important rôle of the architect in defending the interests of his client and would prejudice good design. Therefore, I very much hope that my hon. Friend will accept this Amendment.
I make one final plea to him. It is important to realise that the purpose of this Amendment is not to ask for special treatment for a particular category. I appreciate that my hon. Friend must be getting fed up with pleas by people for special consideration. I do not ask for special treatment for designers and consultants allied to the construction industry. All I am asking is that they should not be specifically excluded from Schedule 4, Group7, item 2. If the Government are able to accept the Amendment, which I believe has support on both sides of the House, it will make the operation of collecting VAT in the construction industry simpler, it will get rid of an anomaly, and will also put paid to the justifiable


bitterness felt in the professions, particularly by architects, engineers, surveyors and other consultants, who feel that they form an integral and indivisible part of the building process.

Mr. Higgins: We have given a great deal of consideration to the point raised by my hon. Friend and Member for Birmingham, Handsworth (Mr. Sydney Chapman). The Customs and Excise Department has considered this matter in the course of consultations and I have received a deputation on the subject.
We appreciate the arguments which my hon. Friend has put. He moved the Amendment with considerable eloquence. However, the essence of his case is that there is no real problem where the architect or surveyor is employed by a taxable person, because the normal working of the credit mechanism will ensure that the tax is passed forward and that the charge which is made will be deductable. But, as my hon. Friend pointed out, in the case of an exempt trader, it may be argued that the services of architects, surveyors and consultants are an integral part of the construction process and that there is some bias against the use of what he described as independent professionals because some firms, such as property companies and banks, would be more inclined to employarchitects on their own staff or buy design-built packages from builders, so that they would be able to deduct any tax charged to them from the architect and others.
It is important to put the matter into perspective. It must be recognised that a great many factors influence a property company, a bank, other exempt persons or the private individual when they come to decide whether to employ an independent architect. Value added tax cannot be regarded as the decisive factor in that choice. It is a comprehensive tax and it is right that, with such a broadly based tax, professional services should be taxed.
It is true that we have given relief to housing, and my hon. Friend referred to the question of the services of an independent architect. I have considerable doubts whether the operation of VAT will result in the situation he has outlined regarding architects employed by private individuals. In that context, the overwhelming argument, which my right hon.

Friend recognised, for zero-rating housing was to avoid the tax being regressive. That argument has less force for those employing independent architects to build their houses.
The kind of extra charge which is likely to be made as a result of VAT when architects are employed by private individuals is not such that it is likely to deter such a person from using an independent architect. It is likely that such a house will be a building of some distinction. It is also true that very often there is a considerable advantage in employing an independent architect or other professionals as a check against the various operations which are being carried out and which may both financially and physically be more complex than is the case when the average person buys a house and has it built to his own custom built specifications.
Of course, there is also the difficult problem of the position of the other professionals. A number of professional services are used in designing and building a house or other type of building. If we were to accept the Amendment, we should soon be besieged by many other professions, including solicitors and no doubt other lawyers, asking to be relieved of the tax as well. This is a problem, and I can understand it in relation to the employment of architects by exempt firms or by private individuals. But we have not come to the conclusion that my hon. Friend seems to have done, that distortion will be such that the independent professional, be he an architect or any other, will find his trade significantly distorted.
I should also point out that the Amendment would cost approximately—it is not easy to make such an estimate—between £2 million and £5 million a year, while the cost of wider relief for the professions which would no doubt feel they had a similar claim would be a great deal more.
That being so, I cannot recommend the House to accept the Amendment. We do not believe that VAT will have the degree of distortion that my hon. Friend suggests. Should there be such distortion, it may be possible to do something to help under Clause 3(6). But I repeat that we do not believe that such distortion will arise.

Mr. Robert Cooke: I know how strongly my hon. Friend the Member for Birmingham, Handsworth (Mr. Sydney Chapman) feels on this matter, and I know that there are misgivings in the architectural profession. My hon. Friend the Financial Secretary has gone some way towards saying that if the fears of my hon. Friend the Member for Hands-worth prove justified, he will do something to help, but he has not been very precise. Can he be a little more forthcoming? There could be a good deal of unsupervised work in the building industry if people choose not to employ an architect because they will have to pay more in value added tax, and that would be a bad thing for the country. I hope that my hon. Friend the Financial Secretary will indicate that if distortion takes place the Government will look at the matter again.

Mr. Higgins: Earlier we discussed the provisions in Clause 3(b) and Clause 6. Clause 3 is designed in such a way that the tax on services to a particular firm could be made non-deductible, while under Clause 6 the self-supply of architect's services by property companies which employed their own architects could be taxed. This is one possible way of removing distortion. I do not feel the House feels it to be a satisfactory way, and it is a last ditch resort, but if the Government see that there has been serious distortion of competition they will take action. I would not readily suggest that we would like to resort to it, but it is nevertheless the ultimate safeguard, it would, however, raise many administrative problems and be likely to cause more problems than it solved. I feel that the distortion will not be anywhere near as great as is suggested, particularly in view of the low rate of the tax as a whole. I believe that the reasons why people employ independent architects are such as to be sufficient to outweigh the additional burden which the tax will involve.

9.45 p.m.

Mr. Sheldon: As the hon. Member for Birmingham, Handsworth (Mr. Sydney Chapman) rightly said, there is a certain amount of distortion. It is obviously difficult at this stage to know just how much it will be. There is a strong case for zero-rating architects and surveyors.

If the Government zero-rate building construction, they should also zero-rate all those elements which go into the cost of construction. The costs of architects and surveyors are directly attributable to building costs, as are the costs of drainage, site preparation and other essential services.
Since the hon. Gentleman said that if there is to be in his opinion a serious distortion he will not hesitate to come back to this House with suggestions, on behalf of the Opposition I can say that we are prepared to leave the matter there.

Mr. Sydney Chapman: Since I have not received the support from the Opposition benches I had hoped to receive, and in view of the undertakings given by my hon. Friend, which do not satisfy me, although I understand and respect them, and on the strict understanding that I shall raise the matter with my hon. Friend after the value added tax comes into operation and it has been seen to be a hardship to the independent professional people within the construction industry, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Trew: I beg to move Amendment No. 49 in Page 110, line 6, leave out
'does not include any work of repair or maintenance and insert 'includes repair or maintenance to churches and listed buildings but does not include any other work of repair or maintenance'.
This Amendment would have the effect of zero-rating repair or maintenance carried out on churches or listed buildings. Before referring specifically to that class of repair or maintenance I should like to say something about the problems of taxing repair or maintenance generally, because that is relevant to the Amendment. I must declare an interest in the construction industry.
As a general principle I agree with levying value added tax on repair or maintenance, if only because there is a considerable amount of revenue involved, between £50 million and £60 million a year. The Department of Customs and Excise will have to work harder to get that revenue than any other class of revenue from value added tax. Administrative problems will arise because of the


difficulty in distinguishing between repairs and maintenance, on the one hand, and alterations and improvements, on the other hand. The distinction is often not an easy one to make.
There are two classes of contract where that is not a great problem, namely, those contracts which are either wholly repair or maintenance, and which are therefore taxable, or those which are wholly new construction and therefore zero-rated. There is a large number of contracts which contant both types of work and where a distinction will have to be made, and those repair or maintenance items isolated, so that they can be taxed.
I have carried out some research into the construction industry, on contracts carried out by the group of companies with which I am associated, to identify the extent of the problem. For contracts of over £2,500 in value the problem is not great. But for contracts of under £2,500 in value about one contract in three poses a problem of definition. I cannot claim that that is typical of the construction industry. But if my hon. Friend were to ask the Secretary of State for the Environment for an analysis of contracts sponsored by his Department he would find a broadly similar pattern.
The administrative burden of distinguishing between one type of work and another will fall largely on the small builder, who carries out the smaller contracts. Out of 73,000 building firms in the construction industry, 61,000 employ fewer than13 men, 53,000 employ fewer than seven men and 20,000 firms are one-man firms. This administrative burden will fall on firms which do not have the administrative staff to support it. My hon. Friend will find that that will be a problem.
I understand that the Department of Customs and Excise will produce rules and guidelines supported by typical cases. It will not be easy for the small man to comprehend those. He will often have to make a provisional assessment of the VAT and may often underestimate it and find himself in a position in which he has recovered less VAT from his client than he has to account for to the Department of Customs and Excise. That will be a problem. Wherever my right hon. Friend can relieve certain classes of repair or

maintenance from VAT, there is a good administrative case for doing so.
There are five good reasons why my hon. Friend should consider zero-rating repair or maintenance work to churches and listed buildings. The first reason is the administrative one that I have outlined: it would relieve from this administrative burden a clearly defined class of repair or maintenance work. There is little problem of definition. A church, within reason, is a church. A listed building is one which has been listed under Section 32 of the Town and Country Planning Act, 1962.
The second reason is that it would be consistent with the philosophy behind the taxation of repair or maintenance which, as I understand it, is that this type of expenditure is largely discretionary, particularly in the case of decoration. In the case of churches and listed buildings, it is not discretionary expenditure, because the community has placed an obligation on those who administer churches or who own listed buildings to keep them in a good state of repair for the sake of the community as a whole.
The third reason is that the class of skilled craftsman able to repair churches and old buildings is rapidly dwindling. It is becoming increasingly difficult to find the craftsmen to do this work. Consequently, this sort of repair or maintenance is becoming disproportionately expensive year by year. Therefore, to tax it is to add a burden to something which is becoming more expensive anyway.
The fourth reason is that it would go a long way towards the hope aroused by paragraph 4.9 of the Green Paper on Value Added Tax, which states:
Consideration could be given to ways of relieving from tax purchases by charities of certain specialised capital assets, for example church buildings …
Hon. Members who spoke in the debate on Clause 15 in Committee, while acknowledging the value of the estate duty concessions announced by my right hon. Friend in the Budget, did not regard it as being of great value to the churches, for two reasons—first, because a very small proportion of the churches' funds is derived from bequests and, second, because a large proportion of church


expenditure is in respect of repair or maintenance.
We should not prejudge the value of the estate duty provision simply because bequests have not accounted for very much in the way of funds in the past. It may well be that, encouraged by these provisions, the churches will bestir themselves and go out and persuade wealthy parishioners to make provision in their wills for their parish churches. Few bodies are better qualified than the churches to persuade the wealthy of the truth of the dictum, "You cannot take it with you".
That is speculation. What is certain is that at this time the churches have a big repair bill and that an Amendment on these lines would be of great assistance to them.
The last reason why I advocate the Amendment is that it will contribute to the whole concept of conserving our historic heritage. Britain is the only European country which does not provide any State assistance for the upkeep of old churches—that is, while they are still in use as churches. Once a church becomes redundant, a small amount of Government money is available.
I quote from a leading article in The Guardian of 5th May on this subject:
Fortunately the Government is beginning to stir, and a private member's bill now before Parliament which would secure the grant of some public money for the preservation of historic churches seems to have the sympathy of the Department of the Environment. It is a matter on which there is no serious political dispute, and the sums involved are not very large, but the money is needed quickly if serious damage and neglect is not to set in.
The Private Member's Bill is that of my hon. Friend the Member for Cannock (Mr. Cormack).
I do not know whether this Bill is favoured by the Department of the Environment, and I do not expect my hon. Friend the Chief Secretary to speak for that Department. But I hope that we shall hear from him a clear statement of the Government's concern about the preservation of our old churches and our historic buildings. I hope that my hon. Friend will go even further and give practical effect to that concern by accepting the Amendment.

Mr. Dalyell: If the Chancellor of the Exchequer felt overcome by his work at the Treasury, on his way to this House he might call in at Westminster Abbey. In the Chapter House there is currently an exhibition organised by the Historic Churches Preservation Trust which outlines in dramatic form precisely what is the need of the churches in terms of the vast costs required if we are to maintain let alone improve some of the glories of medieval English and European architecture. I commend to the right hon. Gentleman a publication called "The Historic Churches Preservation Trust" which outlines the acute need.
I do not intend to weary the House with all that I have said on this subject in Committee. I content myself with reminding hon. Members that the latest reckoning is that there are 9,663 medieval churches in England alone. The situation is less acute in Scotland. It may be that we do not have as many of the glories of medieval architecture. Nevertheless there is this acute problem. It was outlined in Committee, and I support the view of the hon. Member for Dartford (Mr. Trew).

Mrs. Fenner: I wish to support my hon. Friend the Member for Dartford (Mr. Trew) and I follow the example of the hon. Member for West Lothian (Mr. Dalyell) by not wearying the House with arguments which were advanced in Committee, save to express the hope that the Government will consider the claim of the churches in this respect.
I have allied churches with charities on the basis of a very worth precedent. They were so allied in paragraph 4(9) of the Green Paper on VAT, which referred to "charities and religious institutions" and expressed the clear statement that my right hon. Friend the Chancellor of the Exchequer would think of these two speciareas especially.
The church's main committee has estimated that the cost of VAT in an Anglican parish will be of the order of £200 a year. That is equivalent to the proceeds of five jumble sales. Anyone who has ever organised a jumble sale will know that the prospect of five such sales is a formidable one to combat the results of VAT. The committee adds:
Where, as so often, the church is historic and fine and the repair bill correspondingly


heavy, it will be very much more than the order of £200 a year per Anglican parish.
The Roman Catholic church has produced a figure specifically related to repairs and furniture alone. It estimates that the net additional cost to each parish will be about £134. If that is multiplied in each parish all over the country, it is a formidable sum.
I hope both for this reason and for the reasons so very explicitly put forward by my hon. Friend the Member for Dart-ford that we shall not be seen in one place in this House to be studying ways in which we may preserve our historic chuches and in another place to be working out a tax on repairs and maintenance. I ask my right hon. and hon. Friends in the Treasury to say that this is one area in which we can help the churches.

10.0 p.m.

Mr. Hamling: I am a non-churchman and, therefore, I can speak objectively about this matter, perhaps unlike other right hon. and hon. Members. I support the Amendment, not only because it proposes to help medieval churches which are part of our English tradition but more particularly because it relates to older buildings and not just churches. It seems rather ridiculous that in this day and age, when we are spending so much time debating the need to preserve many beautiful buildings which are part and parcel of what we choose to call the most civilised community in the world, we should contemplate taxing the repair of such valuable parts of our British institutions.

Mr. Ramsden: I rise as one who is interested in the work of the Historic Buildings Council to say two things. First, I find this an attractive Amendment and I hope that my hon. Friend will consider it seriously. Secondly, if he finds himself unable to accept it, I hope he will give an undertaking to increase the Government grant to the Historic Buildings Council by at least that amount which will be absorbed by the VAT. It should not be too difficult a calculation.

Mr. Robert Cooke: It goes without saying that the money available to the Historic Buildings Council will have to be increased by the amount of the VAT

that will fall on its operations. There is no question about that. But will the Minister give a little thought to those private enterprise citizens who, by one means or another, scrape together the money to repair their own listed buildings, because they will have to provide the VAT? It may be kind of the Minister to say that they can ask the HBC for a grant, and no doubt they will get it, but to put themselves to the trouble which accepting a grant from a public body entails in order to get the VAT back is, in the view of many of us, a little unreasonable. I hope the Minister will bear that in mind. There is no question about the Historic Buildings Council, but what about the private citizens who are affected by this?

Mr. Higgins: I am sure that the House listened to the speeches made on this subject with considerable sympathy. My hon. Friend the Member for Bristol, West (Mr. Robert Cooke) appealed for private enterprise and, perhaps rather surprisingly, there was an appeal by the Member for Woolwich, West (Mr. Hamling) with regard to the position of our historic churches. I say "rather surprisingly", not to denigrate in any way what he said but because those of us who served on the Standing Committee upstairs will remember that when the question of special treatment for churches and charities was raised the hon. Gentleman was at some pains to advance an argument in favour of the humanist case. It is therefore true to say that the feeling which is aroused in the House on the question of historic churches goes very wide indeed. It is important that we should consider very carefully exactly what is proposed in the Amendment.
There have been two strands running through the argument both in the Committee upstairs and in the House this evening—the question of VAT and the question of grants. When we were debating VAT on the Floor of the House in Committee, I had occasion to say that we saw nothing inconsistent, on the one hand, in a tax which was a broadly based tax being comprehensive in scope and, on the other hand, in grants being made in a specific way to help those areas which were most in need. However, I feel bound to say that this area, with regard not to listed buildings but to historic churches in use, is one of some


controversy, raising many different feelings, and indeed has been over the years.
I will take up first of all the points made by my hon. Friend the Member for Dartford. He raised some rather technical questions on the tax. On the question of repairs and maintenance I have taken a careful note of what he said, but I think it belongs to the overall question of repairs and maintenance for buildings as a whole. I think he mentioned it in order to introduce the main burden of what he wished to convey to the House—the question of the position of listed buildings and particularly of historic churches. He rightly laid stress on the rising cost of employing skilled craftsmen, whose numbers, I am afraid, are undoubtedly diminishing. This is the case whether it is a question of repairing an Oxford or Cambridge college, or a church, or whatever it may be.
There are two main strands in the argument. The first concerns the measures in the Budget. I emphasise again the point made by my right hon. Friend earlier that it is important to take the overall effect of the Budget. It comprises three main elements concerning charities. We have touched on others during the day. The first is value added tax and the others are the provisions regarding gifts for charities and estate duty. I appreciate that at the moment the extent to which the churches will benefit from the provisions regarding gifts, capital gains tax and estate duty may not be all that great.
I again take up the point made in an important intervention by my hon. Friend the Member for Twickenham Mr. Jessel) this afternoon. He said it is important to look not only at what the position was in the past or is now, but at the extent to which my right hon. Friend's provisions may lead to an increase in the flow of funds to charities, whether by way of gifts or bequests. I think hon. Members have been inclined to concentrate rather more on the estate duty provision and to overlook those provisions covering gifts to charities and capital gains tax.
Estate duty relief is estimated at about £15 million. We cannot estimate precisely the figures for gifts and capital gains. I emphasise that the object of these proposals is to increase the flow of

funds to charities. I believe that churches will find that here is an area which opens up new avenues for raising revenue.

Mr. David Mitchell: I take the point my hon. Friend is making. However, if it turns out that there is not the increase in the flow of funds which he is anticipating, will he be prepared to look at this matter again?

Mr. Higgins: I certainly should not wish to do anything to deter people taking these new opportunities. This is an important point. It may take some time for advantage to be taken of these provisions. This point has been made quite legitimately by the churches and others.

Mr. Keith Stainton: Is my hon. Friend positively forecasting an increased cash flow to the churches on account of these concessions, because the revenue out of the total, which has been analysed carefully by the Churches Council, indicates that this is quite tiny at the moment and that the benefits are insignificant?

Mr. Higgins: I appreciate that point. I certainly anticipate that that would be so. I thought it worth emphasising that there are two new opportunities here which have not previously been exploited. I agree that at the moment the level is small from the churches' point of view. I have gone into this matter in some depth and appreciate how small it is. I am merely saying that there is some opportunity here for the future.
On value added tax I ought to mention two points. First, there has been some degree of protest directed to the effect which VAT will have on the churches. That is understandable. It is worth stressing that purchase tax has always been paid right across the board, and no one has ever suggested that it should be refunded to the churches. However, value added tax will be more broadly based, and to that extent the burden is likely to be higher. Charities have not been liable to SET, but there has been an element of SET on the goods and services purchased. None the less, with a broader based tax there is an additional burden in general. This is something which we recognise and to which I wish to give further thought.
There are real difficulties—I think that my hon. Friend the Member for Dartford


will understand this—in accepting the Amendment because if one were to give relief for repair and maintenance of churches and listed buildings, not unnaturally there would be considerable pressure for an extension of this relief to other buildings, perhaps those run by other charities and by other organisations doing good work which are not charities. The scope would be widened considerably, and the cost at the end of the day would be £50 million to £60 million, which is a not inconsiderable amount. There are real difficulties here. This argument is so familiar to the House because of the debates that we have had that I need not emphasise it.

Mr. Healey: The hon. Gentleman said that the cost of the concession would be £50 to £60 million. Is he saying that that is the overall burden falling on the churches?

Mr. Higgins: The right hon. gentleman has not understood what I said. I think that my hon. Friends are clear about what I said. I said that if we were to relieve repair and maintenance of churches it would necessarily give rise to claims for relief for parsonages, and so on.

Mr. Healey: That is another matter.

Mr. Higgins: I have just repeated what I said earlier. My hon. Friends were quite clear about what I said. I was merely seeking to indicate the overall cost if we were to include all repairs and maintenance.

Mr. Trew: I am in no doubt that my hon. Friend was referring to the total tax revenue on repair and maintenance, but has he managed to estimate the revenue from VAT on churches and listed buildings?

Mr. Higgins: I cannot, at this stage, give my hon. Friend that figure, but I shall see whether we can get any indication of what it might be. But this will necessarily be a forecast, because it will depend on precisely what proposals are made for repairs and maintenance.

Mr. Robert Cooke: My hon. Friend can work out the VAT on the money expended by the Historic Buildings Council. It is a simple calculation, be-

cause all the money is for repairs, and none for alterations.

Mr. Higgins: I understood that the question asked by my hon. Friend the Member for Dartford referred to churches and listed buildings taken together.
Perhaps I might say something about listed buildings. My understanding is that under Section 54(9) of the Town and Country Planning Act, 1971, there are listed buildings—which I presume is what my hon. Friend is referring to in his Amendment—which include a statutory list compiled and approved by the Secretary of State. There are effectively two grades—one "of special interest", and one in Grade I, a higher standard. The purpose of the statutory list is to aid the planning and conservation processes. "Listed building consent" is needed from the local planning authority, or it can come from the Secretary of State.
These grades are, in practice, effectively a passport for repair and maintenance grants which can be given on the advice of the Historic Buildings Council for buildings of outstanding architectural or historic interest. At present, the commitment to grant to such buildings is £1 million a year in England. Earlier this year the Government announced an increase of 50 per cent. to widen the scope of grant to cover outstanding conservation areas rather than single out listed buildings. They announced an increase of£500,000 for England, £50,000 for Scotland and £21,500 for Wales. The announcement was made in the other place on 1st March, and it was recognised that it might be necessary to increase the amount still further as applications for grant built up. That being so, if one is to devote the help to the areas most in need, here is an area which obviously we shall need to consider very carefully. As I say, it has been announced in another place that there may be further increases later, and if that is so, obviously we shall bear in mind very much the position about value added tax. But it is an indication of our concern for the preservation of listed buildings, though the matter itself is one for my right hon. Friend the Secretary of State for the Environment, and for my right hon. Friends the Secretaries of State for Scotland and Wales.
The House would not expect me to go into details now. I am anxious to convey the fact that we are well aware of the concern felt in this area regarding listed buildings. Obviously the effect of VAT is something we should need to consider in relation to proposals in this area.

10.15 p.m.

Dr. Tom Stuttaford: What does my hon. Friend think that this concession would cost the Government and what are the Government now spending by grants?

Mr. Higgins: We went over the question of the cost a moment or two ago. I indicated to my hon. Friend the Member for Dartford that I could not at this moment give a precise estimate of the costs in relation to churches and historic buildings taken together, but I shall certainly do what I can to see whether we can get any idea of them. But this will necessarily involve considering what repairs and maintenance are likely to take place with churches and historic buildings. I do not have a precise figure for the cost. But one must look at this in the context of the tax as a whole and the fact that necessarily other claims would be pressed if one were to accept the Amendment as such.
I am seeking to indicate that help in this area would more appropriately be given by grant, but obviously one would also need to consider the effect of VAT on what we obviously regard as an important public matter.

Mr. Charles Loughlin: I should like some clarification of the figure which has been referred to by my right hon. Friend the Member for Leeds, East (Mr. Healey) and hon. Members opposite. The hon. Gentleman will recall that he said that if he made this concession the consequence of making it would be that other organisations and buildings would want a similar concession and the total cost to the Government would be £60 million. When the hon. Gentleman talks about the £60 million, does he mean £60 million related to churches and listed buildings, and other charitable organisations, or is the £60 million a global figure related to repairs and maintenance of all buildings?

Mr. Higgins: I thought that I had made that perfectly clear. It is the overall figure for repairs and maintenance of all buildings. As I have indicated, I do not have a figure for the specific items enquired about by my hon. Friend the Member for Dartford.
I have sought to deal with the question of listed buildings. I turn now to the question of historic churches. I take it that my hon. Friend was concerned primarily with historic churches in use. There is here a difficult area. My hon. Friends who have their names to the Amendment are a great deal more expert, I suspect, than I am about church affairs. I understand that there are already powers under the Local Authorities (Historic Buildings) Act, 1962, which gives local authorities power, but not a duty, to make grants and loans for the repair of historic buildings and some have used this power to assist in the repair of churches. I do not think there is any statutory bar in relation to churches which are of historical architectural interest.
The difficulty there has been that over the years the tendency has been to exclude churches from the provision of public money when it comes to building, for various historical reasons, some of which stem from the origin of the planning Acts and others from the position of the Church. Extensive consideration has been given to the question, and I understand that the whole area of providing financial help for what is, in a sense, a problem of national heritage, is the subject of discussions which are at a comparatively early stage. That being so I do not think it would be proper to say anything specific about grants.
This raises important questions because, as the hon. Member for West Lothian (Mr. Dalyell) has said, the bulk of these churches are in England and, I suppose, the bulk of them are within the scope of the Church of England. The issue raises broader questions of the relationship between Church and State and so on. Difficult questions are involved which I do not believe I can anticipate this evening. I suggest, therefore, that it would not be an appropriate moment to reach a conclusion on the matter but it may be, for the reasons I gave on earlier Clauses, that some action in this area would be more appropriate than


changing the base of an indirect tax which would then raise a number of difficult problems on zero-rating and on the treatment of other repairs and maintenance.
I have sought to outline some of the difficulties in this area. They are very real and it is difficult to say anything more definite. I hope my hon. Friend will recognise we are concerned with the problem as it affects both listed buildings and historic churches, and on that basis I hope he will feel prepared to withdraw the Amendment.

Mr. Brian Walden: I will do the Financial Secretary the compliment of saying that I do not believe that he enjoyed that speech any more than the House did. I shall not accuse him of being definite. I have never known it to take so long to be so indefinite. Quite apart from all the other things he did not have, he did not even have an estimate of the cost of the Amendment and I did not follow the reason why. We heard the old argument that if one concession was made everyone else would want a concession too.
We have had some agreeably short speeches tonight and I do not want to break that happy arrangement. I suspect one thing about the Amendment and I know one thing about it. I suspect that the real root cause of the problem, which should not take 25 minutes to explain, is that the Treasury cares much more about theoretical integrity of that fatuous tax than it does about the practical reality of actually having to meet the problems, and every other confusion follows from that.
Money must be put into the pocket from which it must be taken. Of course the Government will have to make up in grants what they take away in tax. The Financial Secretary's answer to that is to say it is a very comprehensive tax, which it is not. He says that it is a non-anomolous tax, which it is not. He says we have to consider the general position of all the other things in the Budget. Why? This is a perfectly simple straightforward Amendment asking the Treasury to do a perfectly straight-forward thing on the value added tax. I suspect that the real reason the Financial Secretary could not do that is because theory has

been allowed to obtrude far too far into his brief, and reality does not appear in it anywhere.
That is what I suspect. What I know is that, with all respect to the Financial Secretary, what we received was no answer at all. A lot could be said about SET and the relationship between Church and State, though goodness knows what that means. Why allowing churches to have exemption will raise fundamental issues about Church and State, is beyond me.
The position can be summarised as follows. The Treasury has not considered the matter carefully and is in no position to give any kind of pledge or assurance. It is on the horns of a terrible dilemma, and is very anxious to wriggle off it with a few soft words.
I have not the slightest hesitation in advising my right hon. and hon. Friends that, whatever Conservative Members decide, we should not allow the Amendment to be withdrawn and should divide against it.

Mr. Trew: I, too, am disappointed that my hon. Friend the Financial Secretary has not accepted the Amendment. He has stressed that there are technical difficulties, and there is a certain amount of truth in that. He may be right in saying that the Amendment is premature. But we extracted from him, although I agree that it came slowly, a statement of his concern. We now have on record for the first time that the Treasury is concerned about the problem of old churches and historic buildings, which will be welcomed.
These matters must move slowly. I believe that in any event the whole question of value added tax on repair and maintenance is something that we shall have to consider in a year or two in the light of the administrative problems that will arise. There will have to be a great deal of streamlining. When that happens I think it quite reasonable that we should look again at the question of VAT on the repair and maintenance of churches. In the meanwhile, I welcome the fact that my hon. Friend has stated his concern and that discussions are in progress on ways in which assistance can be given.
It is not my intention to press the matter. I beg to ask leave to withdraw the Amendment.

Hon. Members: No.

Question put, That the Amendment be made:—

The House divided: Ayes 183, Noes 196.

Division No. 286.]
AYES
[10.30 p.m.


Abse, Leo
Ginsburg, David (Dewsbury)
Morgan, Elystan (Cardiganshire)


Albu, Austen
Golding, John
Morris, Alfred (Wythenshawe)


Armstrong, Ernest
Gordon Walker, Rt. Hn. P. C.
Morris, Charles R. (Openshaw)


Ashton, Joe
Gourlay, Harry
Morris, Rt. Hn. John (Aberavon)


Atkinson, Norman
Grant, George (Morpeth)
Moyle, Roland


Bagler, Gordon A. T.
Grant, John D. (Islington, E.)
Murray, Ronald King


Barnes, Michael
Griffiths, Eddie (Brightside)
Oakes, Gordon


Barnett, Guy (Greenwich)
Hamilton, William (Fife, W.)
Ogden, Eric


Barnett, Joel (Heywood and Royton)
Hamling, William
O'Malley, Brian


Benn, Rt. Hn. Anthony Wedgwood
Hannan, William (G'gow, Maryhill)
Orbach, Maurice


Blenkinsop, Arthur
Hardy, Peter
Orme, Stanley


Boardman, H. (Leigh)
Harrison, Walter (Wakefield)
Oswald, Thomas


Booth, Albert
Hart, Rt. Hn. Judith
Owen, Dr. David (Plymouth, Sutton)


Boyden, James (Bishop Auckland)
Hattersley, Roy
Padley, Walter


Broughton, Sir Alfred
Healey, Rt. Hn. Denis
Palmer, Arthur


Brown, Hugh D. (G'gow, Provan)
Heffer, Eric S.
Parry, Robert (Liverpool, Exchange)


Buchan, Norman
Horam, John
Pavitt, Laurie


Buchanan, Richard (G'gow, Sp'burn)
Houghton, Rt. Hn. Douglas
Peart, Rt. Hn. Fred


Campbell, I. (Dunbartonshire, W.)
Howell, Denis (Small Heath)
Pentland, Norman


Cant, R. B.
Huckfield, Leslie
Perry, Ernest G.


Carmichael, Neil
Hughes, Mark (Durham)
Prentice, Rt. Hn. Reg.


Carter-Jones, Lewis (Eccles)
Hughes, Robert (Aberdeen, N.)
Price, J. T. (Westhoughton)


Castle, Rt. Hn. Barbara
Hughes, Roy (Newport)
Probert, Arthur


Clark, David (Colne Valley)
Janner, Greville
Reed, D. (Sedgefield)


Cocks, Michael (Bristol, S.)

Rhodes, Geoffrey


Cohen, Stanley
Jay, Rt. Hn. Douglas
Roper, John


Coleman, Donald
John, Brynmor
Ross, Rt. Hn. William (Kilmarnock)


Concannon, J. D.
Johnson, James (K'ston-on-Hull, W.)
Rowlands, Ted


Conlan, Bernard
Jones, Barry (Flint, E.)
Sandelson, Neville


Crawshaw, Richard
Jones, Dan (Burnley)
Sheldon, Robert (Ashton-under-Lyne)


Cronin, John
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Silkin, Rt. Hn. John (Deptford)


Crosland, Rt. Hn. Anthony
Jones, Gwynoro (Carmarthen)
Silverman, Julius


Crossman, Rt. Hn. Richard
Jones, T. Alec (Rhondda, W.)
Skinner, Dennis


Cunningham, G. (Islington, S.W.)
Judd, Frank
Spriggs, Leslie


Dalyell, Tarn
Kaufman, Gerald
Stallard, A. W.


Davidson, Arthur
Kelley, Richard
Stewart, Rt. Hn. Michael (Fulham)


Davies, Denzil (Llanelly)
Kerr, Russell
Strang, Gavin


Davies, Ifor (Gower)
Kinnock, Neil
Summerskill, Hn. Dr. Shirley


Davis, Terry (Bromsgrove)
Lamond, James
Taverne, Dick


Dell, Rt. Hn. Edmund
Lawson, George
Thomas,Rt.Hn.George (Cardiff, W.)


Dempsey, James
Lewis, Ron (Carlisle)
Thomas, Jeffrey (Abertillery)


Doig, Peter
Lipton, Marcus
Tinn, James


Dormand, J. D.
Lomas, Kenneth
Torney, Tom


Douglas, Dick (Stirlingshire, E.)
Loughlin, Charles
Tuck, Raphael


Douglas-Mann, Bruce
Lyon, Alexander W. (York)
Urwin, T. W.


Driberg, Tom
Mabon, Dr. J. Dickson
Wainwright, Edwin


Duffy, A. E. P.
McBride, Neil
Walden, Brian (B'm'ham, All Saints)


Dunnett, Jack
McCartney, Hugh
Walker, Harold (Doncaster)


Eadie, Alex
McElhone, Frank
Wallace, George


Edelman, Maurice
Mackenzie, Gregor
Wellbeloved, James


Edwards, Robert (Bilston)
Mackintosh, John P.
Wells, William (Walsall, N.)


Edwards, William (Merioneth)
McNamara, J. Kevin
White, James (Glasgow, Pollok)


Ellis, Tom
Mallalieu, J. P. W. (Huddersfield, E.)
Whitehead, Phillip


Evans, Fred
Marquand, David
Whitlock, William


Ewing, Harry
Mason, Rt. Hn. Roy
Willey, Rt. Hn. Frederick


Faulds, Andrew
Meacher, Michael
Williams, Alan (Swansea, W.)


Fletcher, Ted (Darlington)
Mellish, Rt. Hn. Robert
Wilson, Rt. Hn. Harold (Huyton)


Foley, Maurice
Mendelson, John
Woof, Robert


Ford, Ben
Mikardo, Ian



Forrester, John
Millan, Bruce
TELLERS FOR THE AYES:


Fraser, John (Norwood)
Milne, Edward
Mr. Joseph Harper and


Freeson, Reginald
Mitchell, R. C. (S'hampton, Itchen)
Mr. James Hamilton


Gilbert, Dr. John
Molloy, William





NOES


Adley, Robert
Bell, Ronald
Bowden, Andrew


Alison, Michael (Barkston Ash)
Bennett, Dr. Reginald (Gosport)
Bray, Ronald


Allason, James (Hemel Hempstead)
Benyon, W.
Brinton, Sir Tatton


Amery, Rt. Hn. Julian
Biffen, John
Brocklebank-Fowler, Christopher


Astor, John
Biggs-Davison, John
Brown, Sir Edward (Bath)


Atkins, Humphrey
Blaker, Peter
Bruce-Gardyne, J.


Balniel, Rt. Hn. Lord
Boardman, Tom (Leicester, S.W.)
Buchanan-Smith, Alick(Angus,N&amp;M)


Barber, Rt. Hn. Anthony
Body, Richard
Burden, F. A.


Batsford, Brian
Boscawen, Robert
Butler, Adam (Bosworth)




Carlisle, Mark
Hutchison, Michael Clark
Peyton, Rt. Hn. John


Chapman, Sydney
Iremonger, T. L.
Powell, Rt. Hn. J. Enoch


Chichester-Clark, R.
Irvine, Bryant Godman (Rye)
Price, David (Eastleigh)


Churchill, W. S.
James, David
Proudfoot, Wilfred


Clark, William (Surrey, E.)
Jenkin, Patrick (Woodford)
Pym, Rt. Hn. Francis


Clarke, Kenneth (Rushclffe)
Jessel, Toby
Ramsden, Rt. Hn. James


Clegg, Walter
Jones, Arthur (Northants, S.)
Redmond, Robert


Cooke, Robert
Jopling, Michael
Reed, Laurance (Bolton, E.)


Corfield, Rt. Hn. Sir Frederick
Joseph, Rt. Hn. Sir Keith
Rees, Peter (Dover)


Cormack, Patrick
Kaberry, Sir Donald
Rees-Davies, W. R.


Costain, A. P.
Kellett-Bowman, Mrs. Elaine
Rhys Williams, Sir Brandon


Critchley, Julian
Kershaw, Anthony
Ridley, Hn. Nicholas


Davies, Rt. Hn. John (Knutsford)
Kimball, Marcus
Roberts, Michael (Cardiff, N.)


d'Avigdor-Goldsmid, Sir Henry
King, Evelyn (Dorset, S.)
Roberts, Wyn (Conway)


Dean, Paul
King, Tom (Bridgwater)
Scott, Nicholas


Deedes, Rt. Hn. W. F.
Kinsey, J. R.
Scott-Hopkins, James


Digby, Simon Wingfield
Kirk, Peter



Dixon, Piers
Kitson, Timothy
Sharples, Sir Richard


Eden, Rt. Hn. Sir John
Knight, Mrs. Jill
Shaw, Michael (Sc'b'gh &amp; Whitby)


Edwards, Nicholas (Pembroke)
Knox, David
Simeons, Charles


Elliot, Capt. Walter (Carshalton)
Lane, David
Sinclair, Sir George


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Le Marchant, Spencer
Skeet, T. H. H.


Emery, Peter
Longden, Sir Gilbert
Soref, Harold


Eyre, Reginald
Loveridge, John
Speed, Keith


Fell, Anthony
McAdden, Sir Stephen
Spence, John


Fenner, Mrs. Peggy
MacArthur, Ian
Sproat, Iain


Fidler, Michael
McLaren, Martin
Stanbrook, Ivor


Fisher, Nigel (Surbiton)
McNair-Wilson, Michael
Stokes, John


Fletcher-Cooke, Charles
Madel, David
Stuttaford, Dr. Tom


Fookes, Miss Janet
Marten, Neil
Taylor,Edward M.(G'gow,Cathcart)


Fortescue, Tim
Mather, Carol
Taylor, Frank (Moss Side)


Foster, Sir John
Maude, Angus
Taylor, Robert (Croydon, N.W.)


Fowler, Norman
Mawby, Ray
Tebbit, Norman


Fox, Marcus
Maxwell Hyslop, R. J.
Temple, John M.


Galbraith, Hn. T. G.
Mills, Peter (Torrington)
Thomas, John Stradling (Monmouth)


Gilmour, Ian (Norfolk, C.)
Miscampbell, Norman
Thompson, Sir Richard (Croydon, S.)


Glyn, Dr. Alan
Mitchell, David (Basingstoke)
Trafford, Dr. Anthony


Goodhew, Victor
Moate, Roger
Tugendhat, Christopher


Gorst, John
Money, Ernle
Turton, Rt. Hn. Sir Robin


Gower, Raymond
Monks, Mrs. Connie
van Straubenzee, W. R.


Grant, Anthony (Harrow, C.)
Monro, Hector
Vaughan, Dr. Gerard


Green, Alan
Montgomery, Fergus
Vickers, Dame Joan


Griffiths, Eldon (Bury St. Edmunds)
More, Jasper
Walder, David (Clitheroe)


Gurden, Harold
Morgan, Geraint (Denbigh)
Walker-Smith, Rt. Hn. Sir Derek


Hall, John (Wycombe)
Morrison, Charles
Walters, Dennis


Hall-Davis, A. G. F.
Mudd, David
Ward, Dame Irene


Hamilton, Michael (Salisbury)
Murton, Oscar
Weatherill, Bernard


Hannam, John (Exeter)
Neave, Airey
Wells, John (Maidstone)


Harrison, Col. Sir Harwood (Eye)
Noble, Rt. Hn. Michael
White, Roger (Gravesend)


Hawkins, Paul
Normanton, Tom
Wilkinson, John


Higgins, Terence L.
Nott, John
Winterton, Nicholas


Hill, John E. B. (Norfolk, S.)
Onslow, Cranley
Woodnutt, Mark


Hill, James (Southampton, Test)
Oppenheim, Mrs. Sally
Wylie, Rt. Hn. N. R.


Holland, Philip
Owen, Idris (Stockport, N.)
Younger, Hn. George


Hordern, Peter
Page, Rt. Hn. Graham



Hornsby-Smith,Rt.Hn.Dame Patricia
Page, John (Harrow, W.)
TELLERS FOR THE NOES:


Howe, Hn. Sir Geoffrey (Reigate)
Parkinson, Cecil
Mr. Hugh Rossi and


Howell, David (Guildford)
Percival, Ian
Mr. Hamish Gray.

Question accordingly negatived.

Further consideration of the Bill, as amended, adjourned.—[Mr. Barber.]

Bill, as amended in the Committee and in the Standing Committee, to be further considered tomorrow.

SCOTTISH GRAND COMMITTEE

Ordered,

That for the remainder of the present Session, Standing Order No. 71 (Matters relating exclusively to Scotland) shall have effect as if the word 'three' were substituted for the word 'two' in line 15.—[Mr. Rossi.]

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Rossi.]

Adjourned accordingly at twenty-one minutes to Eleven o'clock.